[Senate Hearing 113-]
[From the U.S. Government Publishing Office]
STRENGTHENING TRADE ENFORCEMENT TO PROTECT AMERICAN ENTERPRISE AND GROW
AMERICAN JOBS
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WEDNESDAY, JULY 16, 2014
U.S. Senate,
Subcommittee on Homeland Security,
Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:39 p.m., in room SD-138, Dirksen
Senate Office Building, Hon. Mary L. Landrieu (chairman)
presiding.
Present: Senators Landrieu, Coats, and Cochran.
opening statement of senator mary l. landrieu
Senator Landrieu. Good evening. I welcome the panel to this
very important hearing and particularly our witnesses from
Louisiana, who I will introduce shortly.
I apologize for the slight delay. We had a vote and just
got caught up on the floor. And I thank my colleagues for their
patience.
I am very pleased to welcome you all and to hold this very
important hearing that Ranking Member Coats and I spoke about
in our continued focus on strengthening trade enforcement to
protect American jobs and businesses here at home.
For Senator Cochran, who joins us here today, happily, he
has been focused on this issue for quite some time and a real
partner with me to make sure that the Gulf of Mexico businesses
are treated fairly.
So I thank Eddie Hayes and Joe Sanroma, who have braved
some weather difficulties to be here today, to bring your
perspectives.
I am going to try to go quickly through my statement and
submit some of it to the record, and turn to my Ranking Member
Coats for his opening statement, and Senator Cochran, if you
would like to say anything. And then we will get right to our
hearing.
Over 3 years ago, I brought this subcommittee together to
examine the impacts of trade enforcement: Are we doing enough?
Could we do more? Why is enforcing our trade rules so important
for creating and maintaining jobs in America?
This subcommittee is an appropriations subcommittee and has
a responsibility for this effort, and we want to make sure it
is being done correctly.
I understand from staff this was the first time an
appropriations subcommittee has ever called such a hearing, and
I understand that some improvements have been made since then.
I have worked closely with members of this subcommittee and
the Department of Homeland Security (DHS) to institute several
important and necessary changes to our system to better protect
American jobs, to collect duties that are owed.
As of today, we are collecting more duties and catching
more illegal importers than ever before, although there is much
work to be done.
In this hearing, I want to revisit the issue of dumping
with a focus on some domestic products that represent some of
the most egregious violations.
The Department of Homeland Security has been in the news
recently for the role it plays in keeping our borders safe and
secure. However, not much recent media attention has been
focused on the very important role that Customs and Border
Protection (CBP) and Immigration and Customs Enforcement (ICE)
play in keeping our domestic producers at a level playing field
with the rest of the world.
And in fact, after the Internal Revenue Service, Homeland
Security is the Federal Government's second-largest source of
collection revenue. In fiscal year 2012, companies imported
approximately $2.37 trillion in goods and deposited $3 billion
in estimated duties into the Treasury.
Together with the Department of Commerce, these agencies
assess duty rates on imported goods, collect those duties, and
ensure that goods entering the Nation's stream of commerce are
traded fairly and are safe for customers.
Unfortunately, many U.S. businesses and their employees are
harmed when other countries and companies unfairly and
illegally dump their goods on our market. Those actions, which
are frequently deliberate, undercut the cost of products made
in this country, thereby increasing the cost of production,
reducing profits, and, in some extreme cases, putting people
completely out of business.
There is no doubt that illegal dumping costs Americans
businesses and jobs.
Since the last hearing, we have instituted some changes to
the way CBP and ICE tackle these issues.
First, at my request, the commissioner created a division
within CBP dedicated solely to the collection of antidumping
and countervailing duties.
Second, CBP has created Centers of Excellence and Expertise
at ports across the country to focus on specific industries
prone to illegal dumping. I hope we have a graph to put up on
that.
Third, CBP and ICE have created red teams who are tasked
with thinking like international criminals trying to exploit
the U.S. trade system. These teams continue to help to identify
and close loopholes in our systems.
And finally, Senator Coats and I have appropriated $9
million additional dollars over the last 3 years for increased
use of single transaction bonds, which allow the United States
to collect unpaid duties in a more effective manner.
We will hear more about some of these successes that have
occurred, but I am still concerned that we could do more, and
we can be better at protecting American businesses and jobs,
and enforcing the laws that are on our books.
Two of the commodities we will be talking about today,
crawfish and shrimp, are very important to Louisiana, to the
Gulf Coast, and to other coastal areas, but particularly the
Gulf Coast.
They account together for over 15,000 jobs in my State of
Louisiana. In 2014, Louisiana produced 68 million pounds of
shrimp. During that same time, however, the United States
imported 455 million pounds of shrimp from countries like
Thailand, Ecuador, India, Indonesia, and China.
Since 2005, importers of shrimp from China have failed to
pay more than $77 million in dumping duties, some of which is
supposed to be redistributed to those injured in the United
States and to shrimpers in my State. And I want to make sure
that we continue to push that issue.
Continued failure to collect these duties is fiscally
irresponsible, and it further threatens our Gulf Coast seafood
industry, of which we are very proud.
In March 2008, the Government Accountability Office
reported that, as of September 2007, CBP had been unable to
collect more than $600 million in antidumping and
countervailing duties imposed to remedy unfair trade practice.
The number has now grown to $2 billion.
This is money that is owed to businesses for unfair and
illegal dumping.
In addition to these products that are so important to
Louisiana, we want to focus today on steel and steel pipe,
which is important to both Louisiana and Indiana, steel tubing,
catfish in Mississippi, honey, garlic, wooden bedroom
furniture. These are just a few of the many industries that are
important to the States of Mississippi, Indiana, Louisiana, and
others, that are affected when this system that we have
designed does not work, or fails to work as well as it could.
We look forward to hearing from our panel today. And again,
I thank all of you for the testimony that you have submitted to
our subcommittee.
And I am going to continue to stay focused on this issue,
because it means jobs for America that are threatened because
we at the Federal level are somehow failing to do our duties as
well as we should to make sure that you are being protected
under the trade laws that we have passed.
Senator Coats.
statement of senator daniel coats
Senator Coats. Madam Chairman, I appreciate your statement,
particularly our staying engaged on this issue. There are so
many things going on now through the Department of Homeland
security that potentially could be distracting or take our
attention, and it is legitimate, away from this mission of DHS,
but this is an important one.
And the Chairman just announced and said that she wants to
keep it prominent, and I agree with that. I think it is
important to our economy and the future of our country, and a
lot of jobs in America. So I am glad to hear that.
We don't produce crawfish or shrimp in Indiana. If we do,
you probably wouldn't want to buy it.
It would not come out of the kind of water that gives you
the best shrimp and crawfish.
But we do produce steel. We are the largest steel producing
state in the Nation, to the surprise of many people. Nucor is
one of the key industries in our State that contributes to that
steel.
Rick Blume, I am awful glad that you are here speaking on
behalf of Nucor. I know you are also speaking on behalf of the
steel industry, in terms of countervailing duties and dumping
and a number of other issues, and I am looking forward to
hearing from you.
prepared statement
I am going to shorten my remarks also, so that we can go
forward here.
Madam Chairman, I will submit my full statement for the
record.
[The statement follows:]
Prepared Statement of Senator Daniel Coats
Madam Chairman, thank you. It is good to see you this afternoon.
I'd like to welcome our witnesses as well--it is a pleasure to have
you before the Subcommittee to discuss such an important topic.
As you all know the Department of Homeland Security has a vast
mission, from preventing terrorism to enforcing trade laws, to
providing disaster relief. Today we will focus narrowly on the
Department's mission of trade facilitation and enforcement.
We have with us today on our second panel two of the most relevant
agencies to that mission: Customs and Border Protection (CBP) and
Immigration and Customs Enforcement (ICE). In addition to facilitating
the legitimate flow of people and goods across our borders, CBP is the
second-largest generator of revenue for the US government. Every year,
CBP's Office of Field Operations collects $40 billion dollars in
duties, fees, and tariffs. ICE, the Department's investigative arm, is
the sole agency with the authority to conduct investigations and
convict commercial fraud violations. In fiscal year 2013, ICE opened
796 new investigations and made 178 criminal arrests related to
commercial fraud. I think this is good progress and I am proud of the
work done by the men and women at CBP and ICE.
I mention the Department's myriad responsibilities because in a
time of a constrained budgets, there will naturally be a competition
for resources. Agencies are being asked to do more with less and I'm
eager to hear about innovation and cooperation with the private
sector--representatives of which are sitting before us--on how to do
just that.
Trade enforcement is important. Whether it is anti-dumping orders,
intellectual property rights protection, or safety of commercial
merchandise, we must be vigilant. In my State of Indiana, we have a
number of industries that rely on antidumping and countervailing duties
to level the playing field. I look forward to hearing from the private
sector on the health of their relationship with the Department of
Homeland Security and how the Department is partnering with them.
Madam Chairman, that concludes my statement. Thank you.
Senator Landrieu. Thank you, Senator Coats.
Senator Cochran.
STATEMENT OF SENATOR THAD COCHRAN
Senator Cochran. Madam Chairman, I am pleased to join you
and Senator Coats in welcoming our panel, and we look forward
to their testimony and our review of policies and laws that
affect the Gulf of Mexico.
Thank you.
Senator Landrieu. Thank you very much.
I want to note, before we start the first panel, and I will
introduce them just in a moment, I would like the Acting
Assistant Commissioner for the Office of International Trade to
stand. He is in the room.
Thank you.
And also the Acting Assistant Commissioner of the Office of
Field Operations and the Assistant Director of International
Affairs, thank you all for being here to listen to the first
panel. And we will look forward to your testimony.
Thank you all. You can be seated.
I wanted to have the first panel go first so that our
officials responsible for carrying out these duties could hear
directly from you all on the ground what is actually happening,
have we made some progress, which we believe we have made some,
what else needs to be done.
So with that, let me welcome the panel. Mr. Edward Hayes,
partner at Leake & Andersson, who is representing many of the
shrimpers and the shrimping industry; Mr. John Steinberger,
counsel who is going to give us insight into the crawfish
situation; Mr. Rick Blume, general manager of commercial
steelmaking at Nucor, which not only has an Indiana connection
but a Louisiana connection in St. James Parish--we welcome you;
and Mr. Joe Sanroma, executive member of the Honey Producers
Association, which we thought could use a little attention. And
we thank you for coming.
So, if you will start, Mr. Hayes, with a 4- to 5-minute
opening statement, and then we will have some questions and
then move to the second panel.
STATEMENT OF EDWARD T. HAYES, PARTNER, LEAKE &
ANDERSSON, LLP
Mr. Hayes. Thank you, Madam Chairman. Good morning, Madam
Chairman, Ranking Member Coats, and Senator Cochran. It is a
great pleasure to be here today to testify on these important
matters.
My name is Eddie Hayes. I am a partner at the law firm of
Leake & Andersson in New Orleans, Louisiana, where I lead the
firm's international trade practice. I am also an adjunct
professor of law at Tulane University, which is no threat to
your football teams, even Indiana, I am sure, certainly not LSU
and Ole Miss.
Before I start my testimony, I want to thank the entire
subcommittee and especially the staff who has worked so hard on
this important legislation. We think this is a very important
first step in addressing these important issues, and I wanted
to say thank you.
I am very privileged to represent the American Shrimp
Processors Association. Most shrimp processors are successful,
multigenerational, small businesses. We are concentrated on the
Gulf Coast in Louisiana, Mississippi, and Alabama, and often we
are the largest employers in our communities. We work closely
with the boats and the docks, and our communities understand
the importance of trade enforcement and trade remedies to their
livelihoods.
Louisiana's shrimp industry supports 14,000 jobs and
contributes $1.3 billion to our economy in Louisiana. In 2012,
more than 100 million pounds of shrimp were harvested in
Louisiana.
Due to illegally dumped imports, the American shrimp
industry has lost jobs and profits, and has fought to obtain
and maintain trade relief.
This dumping has occurred at sizable levels. For example,
the China-wide dumping margin is almost 113 percent. Basically,
that means that they are underselling fair market value by 113
percent, which is astonishing.
We deeply appreciate all of the support that the industry
has received from this subcommittee, including the testimony
from Chairman Landrieu and Senator Cochran at the International
Trade Commission during the sunset review in 2011 and then also
the important countervailing duty cases that we brought last
year.
We are very grateful that you recognize that systemic
government and industry distortion of the shrimp market is only
growing in countries like China, India, Indonesia, Malaysia,
Thailand, and Vietnam, and it must be stopped.
And we commend Chairman Landrieu and Senator Cochran for
their bipartisan leadership for the shrimp industry on a range
of issues from Hurricane Katrina to the gulf oil spill and to
trade. We have had our fair share of challenges down there. And
Madam Chairman and Senator Cochran have been excellent leaders
for those battles.
I also want to briefly mention the crawfish industry. There
are more than 1,800 crawfish farmers and fishermen in Louisiana
alone, and crawfish contributes nearly $120 million to our
economy each year. It is a very important industry.
Like our shrimp industry, America's crawfish industry has
lost jobs and profits from illegally dumped imports from China.
And it also has secured trade relief.
The China-wide dumping margin on crawfish tail meat is over
200 percent. So if you thought 113 percent was bad, try 200
percent.
But America's seafood industry has not seen the full
measure of relief intended under the law due to duty invasion,
transshipment, and circumvention. Overall, our seafood industry
has been the hardest hit by duty collection shortfalls.
Unpaid duties on seafood alone account for about 40
percent, or $689 million, of the more than $1.7 billion in
unpaid antidumping and countervailing duties since 2001.
Crawfish and shrimp account for the vast majority of that.
And duty nonpayment on shrimp alone has deprived the U.S.
Government of $77 million.
The shrimp industry has worked hard to tackle transshipment
and circumvention firsthand, as such schemes are quite common.
Recently, there was evidence in a criminal investigation
involving Chinese and Vietnamese shrimp producers that
indicates transshipment from Vietnam and maybe China through
Cambodia.
And remember, members of the subcommittee, that Vietnam is
a party to the Trans-Pacific Partnership (TPP) negotiations,
which we will hopefully have a chance to discuss later.
A large number of companies, and this is the most shocking
of all, actually blatantly advertise providing transshipment
services over the Internet. One company, for example, has an
actual Web page entitled, ``Transshipment: The best way to
avoid antidumping.''
And let me paraphrase from that Web site: Are you looking
for a way to avoid antidumping? We can help you provide the
documents to your government, certifying that the products are
made in other low-tariff countries instead of China.
This site goes on to mention Malaysia as one of the
possible transshipment sites. And I just want to remind the
members again that Malaysia is a party to the TPP negotiations.
As you can see, Madam Chairman, my time is up. I have just
a few more comments, if I can have another minute. Thank you.
As you can see, these problems have seriously compromised
the integrity of our industry trade relief, and they have
cheated the Government of revenue at a time when fiscal
concerns are as important as ever. We strongly support the
trade enforcement objectives provided in S. 2534, and we thank
Chairman Landrieu for securing the $3 million for duty
collection and appreciate the emphasis on the uncollected
duties from China.
We also thank the Chairman and the subcommittee for urging
the Office of the United States Trade Representative (USTR) to
include duty evasion and the stopping of it in the principal
negotiating objectives of the USTR, and we think that ought to
be part of the Trade Promotion Authority (TPA).
One other thing that I will mention before I close is the
insufficient bonding requirements are a particularly acute
problem in agriculture and aquaculture, where fragmentation in
foreign industries allows players to appear and disappear
without a trace. And I am sure our Customs colleagues will
recognize that.
While all of the measures in your legislation are
critically important, the last thing I want to mention is it is
critical for us to support the continuation of the current
retroactive system of collecting duties.
It is by far the most fair and transparent system in the
world, and it is extremely important to actually collect the
correct amount of dumping duties.
PREPARED STATEMENT
In conclusion, Madam Chairman, the spotlight today on these
issues is welcome. I thank you for the opportunity to provide
comments, and I look forward to questions.
[The statement follows:]
Prepared Statement of Edward T. Hayes
Madam Chairman, Ranking Member Coats, members of the Committee,
good morning. My name is Eddy Hayes, and I am a partner at the law firm
of Leake & Andersson LLP in New Orleans, Louisiana. I lead the firm's
international trade practice, and I am an adjunct professor of Law at
Tulane University Law School, where I teach a seminar on the WTO. I am
a member of the Louisiana District Export Council, part of the U.S.
Department of Commerce Commercial Service, and a member of the Board of
the New Orleans World Trade Center. I serve on the roster of panelists
eligible to adjudicate trade disputes under Chapter 19 of the North
American Free Trade Agreement. I also represented the city of New
Orleans on the U.S. Trade Representative's Intergovernmental Policy
Advisory Committee from 2011 to 2013.
I am also privileged to serve as counsel to the American Shrimp
Processors Association, the largest national organization of shrimp
processors. Many of these processors are small businesses. Often, they
are the largest employers in their communities. We work closely with
the boats and docks, and our communities understand the importance of
strong trade enforcement to their livelihoods.
Louisiana's shrimp industry in particular supports over 14,000 jobs
and contributes 1.3 billion dollars to Louisiana's economy.
As a result of illegally dumped imports of shrimp from several
countries, the American shrimp industry has lost jobs and profits. Over
the past decade, the industry has fought to obtain and maintain relief
from these imports.
This dumping has occurred at sizeable levels. For example, the
China-wide entity dumping margin on shrimp is almost 113 percent.\1\
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\1\ See Administrative Review of Certain Frozen Warmwater Shrimp
From the People's Republic of China: Final Results, Partial Rescission
of Sixth Antidumping Duty Administrative Review and Determination Not
To Revoke in Part, 77 Fed. Reg. 53,586 (Dep't Commerce Sept. 4, 2012)
(finding a PRC-wide entity dumping margin of 112.81 percent).
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We are deeply appreciative of all of the support the industry has
received from this Committee, including the powerful testimony that
both Chairman Landrieu and Senator Cochran provided to the U.S.
International Trade Commission in its 2011 sunset review of the
antidumping orders on shrimp, which resulted in a vote to keep the
orders in place.
We also appreciate Chairman Landrieu's and Senator Cochran's
testimony supporting the countervailing duty cases against shrimp from
seven different countries last year.
We commend Chairman Landrieu and Senator Cochran for their
bipartisan leadership for the shrimp industry on a range of issues from
Katrina to the Gulf Oil Spill to trade.
I would also like to mention the crawfish industry. There are more
than 1,800 crawfish farmers and fishermen in Louisiana alone, and
crawfish contributes nearly 120 million dollars to Louisiana's economy
each year.
Like our shrimp industry, America's crawfish industry has lost jobs
and profits from illegally dumped imports from China, and it has
secured trade relief. The China-wide entity dumping margin on crawfish
tail meat is over 200 percent.\2\
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\2\ See Freshwater Crawfish Tail Meat From the People's Republic of
China: Final Results of the Third Expedited Sunset Review of the
Antidumping Duty Order, 79 Fed. Reg. 13,278 (finding a PRC-wide entity
rate of 201.63 percent).
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But America's seafood industry has not seen the full measure of
relief intended under the law, due to duty evasion, transshipment, and
circumvention.
In fact, America's seafood industry has been perhaps the hardest
hit by duty collection and enforcement shortfalls. As the Committee is
aware, Customs has reported more than 1.7 billion dollars in unpaid
antidumping and countervailing duties since 2001. Unpaid duties on
seafood alone account for about 40 percent, or 689 million dollars, of
that total.\3\ Most of that amount is due to duties that have not been
paid by importers of crawfish and shrimp.
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\3\ ASPA's calculations based on CDSOA data reported by CBP for
fiscal years 2001-2013, available online at http://www.cbp.gov/trade/
priority-issues/adcvd/continued-dumping-and-subsidy-offset-act-cdsoa-
2000.
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Duty non-payment in the shrimp industry alone has deprived the U.S.
Government of more than 77 million dollars in tariff revenue since the
orders were imposed.\4\
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\4\ 4 Id.
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The shrimp industry in particular has also had to tackle
transshipment and circumvention firsthand. In recent reviews of the
antidumping duty orders on frozen warmwater shrimp from China and
Vietnam, a party submitted evidence from a Federal criminal
investigation of the president and owner of a U.S. importer that was an
affiliate of Chinese and Vietnamese producers, which indicated
transshipment of shrimp from Vietnam and possibly China and other
countries through Cambodia to avoid duty liability.\5\
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\5\ Administrative Review of Certain Frozen Warmwater Shrimp From
the People's Republic of China: Final Results, Partial Rescission of
Sixth Antidumping Duty Administrative Review and Determination Not To
Revoke in Part, 77 Fed. Reg. 53,856, 53,857 (Dep't Commerce Sept. 4,
2012) and accompanying Issues and Decision Memorandum at 2-6, 28.
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Unfortunately, such schemes are quite common.
Indeed, some companies even blatantly advertise providing
transshipment services for the purposes of duty evasion over the
Internet. One company, for example, has a webpage entitled
``Transhipment, the Best Way to Avoid Anti-dumping.'' It states as
follows (typos in the original):
Are you looking for a way to avoid antidumping? Transhipment may be
the best way at present.
Nowadays, Transshipment is the best way to avoid anti-dumping
duties. Now, we will tell you how it helps you to avoid antidumping and
how it reduces your cost.
As we know, your country doesn't charge high tariffs for all the
country but China. Now we can help you to provide the doucments to your
government certifying that the products are made of other low tariff
countries instead of China.
How can we do it?
1st: We need to export those products (made in China) to other
country (just as Malaysia). It is easy for us to do it and which just
need cost your little money.
2nd: We will finish custom clearance for those cargos in Malaysia
and then send it to our warehouse. Picking up those to re-load it to
the new container (booking with Malaysia).
3rd: Finding a local factory to provide all the original documents
to your country. And then export the products to your instruction Post.
After the operation of above, the original will be changed from
China to Malaysia. You just need to pay the normal import duty.
We are experienced in it for many years, and we are confident that
we have the ability to help you to lower the import tariff.\6\
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\6\ ``Transhipment, the Best Way to Avoid Anti-dumping,'' available
on-line at http://reexport.en.busytrade.com/products/info/1796943/
Transshipment-the-Best-Way- To-Avoid-Anti-dumping.html (last visited
July 11, 2014).
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These problems have seriously compromised the integrity of US trade
laws, trade relief for American industries and have cheated the
Government of tariff revenue, at a time when fiscal concerns are as
important as ever. The losses due to unpaid duties alone exceed 1.7
billion dollars since 2001; it is impossible to quantify the additional
amounts lost to transshipment, circumvention, and other schemes.
If the IRS only collected two out every three tax dollars owed, it
would be on the front page of every newspaper, and rightly so. This
duty collection problem deserves a similar level of urgent attention.
The Government has tried to beef up enforcement actions, and there
have been some headlining cases in recent years. The shrimp importer
case I mentioned is one example.
But duty evasion persists, and more must be done.
According to a GAO report, Customs received approximately 400
allegations of evasion from 2008 through August 2011. Of those, about
half could not be verified and no further action was taken, roughly one
quarter were verified and referred to the appropriate port or to ICE
for enforcement, and the rest were still pending as of September
2011.\7\
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\7\ Government Accountability Office, Antidumping and
Countervailing Duties: Management Enhancements Need to Improve Efforts
to Detect and Deter Duty Evasion, GAO Report No. GAO-12-551 (May 2012)
at 28-29.
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And according to Customs' own AD/CVD enforcement data, in fiscal
year 2012, Customs received 149 allegations of duty evasion and
noncompliance. Of those 149 allegations, Customs confirmed and took
action on 15 violations and found no violation or insufficient
information for 11 allegations.\8\ Thus, Customs either took action or
determined no further action was needed within a year or less on only
17 percent of allegations.
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\8\ CBP, ``Fiscal Year 2012 AD/CVD Enforcement Results'' (Jan. 14,
2013).
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For these reasons, we strongly support the trade enforcement
objectives provided in Senate Bill 2534, and Chairman Landrieu and this
Committee's trade enforcement priorities, and we hope this will provide
an opportunity to improve the trade remedies system.
We understand that resource constraints often limit Customs'
enforcement efforts, and so we thank Chairman Landrieu first and
foremost for securing 3 million dollars for duty collection.
We appreciate Chairman Landrieu's specific emphasis on the need for
Customs to work to collect the 1.6 billion dollars in uncollected
antidumping and countervailing duties from China. As is the case with
uncollected duties overall, imports from China account for the vast
majority of uncollected duties on seafood--almost 58.9 million dollars
in uncollected duties on shrimp, and 582 million dollars in uncollected
duties on crawfish.
We also thank Chairman Landrieu for directing Customs, Commerce,
and the Department of Treasury, to report to the Committee on how
requiring cash deposits ofestimated duties during new shipper reviews
would strengthen the administration of the Nation's AD/CVD laws.
Currently, a new exporter or producer enjoys the privilege to post
bonds rather than cash deposits while it awaits the results of a new
shipper review. This should be abolished. Importers of merchandise from
new shippers should face the same cash deposit requirements as
importers from other companies that have not received individual rates.
The problem is that the bonds required in these situations are
simply not sufficient to allow Customs to collect the full amount of
duties it is owed. In too many cases, when a new shipper fails to
achieve a lower rate in its requested review, the importer of record is
unable or unwilling to meet its duty obligation. In some cases, the
``importer'' is little more than a U.S. post office box address for the
foreign producer or exporter, and there is no way to collect at all.
Customs is then forced to try to collect against the surety that
provided the bond. But if importers are only required to obtain a
continuous entry bond, which is capped at 10 percent of the duties owed
in the previous year, what Customs is able to collect from a surety may
be far less than the full amount actually owed.
Indeed, the GAO has found that the chief obstacle to ensuring
collection of retrospectively assessed duties is the absence of
adequate security, such as bonds.\9\
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\9\ Written Testimony of Timothy E. Skud, U.S. Department of the
Treasury, Deputy Assistant Secretary for Tax, Trade, and Tariff Policy
Before the Subcommittee on Trade, Committee on Ways and Means (May 20,
2010), available at http://waysandmeans.house.gov/media/pdf/111/
2010may20_skud_testimony.pdf.
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The problem is particularly acute for agriculture and aquaculture
products, where fragmentation in the foreign industries allows players
to appear and disappear without a trace. That is one of the reasons why
seafood alone accounts for about 40 percent of uncollected duties.
We further thank Chairman Landrieu for directing Customs to review
the Advisory Committee on Commercial Operations membership and consider
adding affected domestic industries to sit on its Trade Enforcement
subcommittee. The domestic industry has the most vested interest in
enforcing our trade laws and should have a voice on that committee.
We welcome Chairman Landrieu's directives to Customs to provide
public reports on its collection and enforcement efforts, as well as
the challenges that prevent collection. So far, Customs has not been
required to report on its enforcement activities to the public in a
comprehensive or systematic manner.
We support Chairman Landrieu's efforts to urge the United States
Trade Representativeto include in the principal negotiating objectives
of the United States for trade agreements the objectives of preventing
evasion of U.S. trade remedy laws through information exchanges and
site visits.
We also appreciate Chairman Landrieu's encouragement of a joint
legislative proposal from the Department of Commerce and Customs to
remove legal barriers to the sharing of information between those two
prime trade compliance and enforcement agencies. Customs should forward
information about duty evasion to Commerce so it can be part of its own
record, and so that parties to the Commerce proceeding can access that
information under protective order. Similarly, parties should be
allowed to share confidential information learned in a Commerce
proceeding with Customs without violating their confidentiality
obligations.
In addition to information sharing between the Commerce and
Customs, information sharing between the domestic industry and Customs
should also be encouraged. The ability of Customs to share useful
information with the domestic industry is currently hampered by legal
restrictions such as the Trade Secrets Act. Procedures akin to
Commerce's administrative protective orders should be available at
Customs. Customs should also be able to update the domestic industry on
the status of investigative matters without violating its
confidentiality obligations. This would keep the domestic industry
involved and invested and permit Customs to share its successes.
Finally, we further support automation of single transaction bonds
by Customs to improve duty collection and to develop the necessary
expertise to verify the adequacy of such bonds. We hope that Customs
will review and reassess bonding requirements based on the expertise it
gains from this process.
While these improvements to the trade remedy system are needed, we
strongly support the continuation of the current retroactive system for
assessing AD/CVD duties. The retroactive system is the most accurate
and fair way to determine the proper duty margins. Moving to a
prospective system, as some have advocated, would not solve the problem
of duty under-collection; it would simply mask the problem, undermining
the relief domestic producers are due under the law.
Under the current system, duty margins can be reexamined each year,
if an administrative review is requested. Through the administrative
review, Commerce can determine whether the dumping or subsidization has
increased or decreased retrospectively based on prices, costs, levels
of subsidization and other data contemporaneous to the importation of
the merchandise. Commerce then can adjust the margins up or down
accordingly. This method ensures that the margins reflect the market
reality with respect to sales of the particular imported merchandise.
Only a retrospective system provides a remedy for under-assessment
of duties due to increased dumping or subsidization. Other countries'
current prospective systems permit duty refunds for importers, but do
not permit increases in duty assessments after importation where
dumping or subsidization has increased. Importers could get a low rate
initially and then increase dumping in the future. A prospective system
would remove the consequences for increasing dumping or subsidization
in the future. Thus, a prospective system could allow--and even
encourage--foreign producers to hide increased dumping and
subsidization, and give domestic producers no remedy for this practice.
Congress should not permit such a foundational shift that would
make our system less accurate and less fair.
And a prospective system would not solve the problem of evasion
tactics like transshipment and circumvention. Those tactics are used to
falsely claim that imports are not subject to AD/CVD duties at all, and
this would persist whether duties are assessed prospectively or
retrospectively.
A prospective system is not the answer.
In sum, investment in trade enforcement will bring a concrete
revenue return to the Government from companies that do not follow the
trade rules, and will save American businesses and jobs. This is money
well spent. At a minimum, we should ensure that Customs has the
resources it needs, and we should ensure and reinforce the integrity of
our trade remedy laws.
I thank the Committee for the opportunity to testify today, and I
look forward to working with you on these important issues. I would be
happy to take any questions you may have.
Senator Landrieu. Thank you very much, Mr. Hayes.
Mr. Steinberger.
STATEMENT OF JOHN C. STEINBERGER, OF COUNSEL, ADDUCI,
MASTRIANI & SCHAUMBERG, L.L.P.
Mr. Steinberger. Thank you very much for having me here
today. My name is John Steinberger. I am of counsel with the
Washington, DC, law firm of Adduci, Mastriani & Schaumberg. We
represent crawfish processors in Louisiana, who collectively
account for about 85 percent of that industry, all of which is
now in Louisiana.
Customs has a hard job, no doubt about that. But I am here
to talk about a small part of that job that ought to be easy,
and that is collecting on bonds posted by U.S. insurance
companies.
Here is how this is supposed to work. Crawfish tail meat
comes in from China. It is subject to antidumping duties. It
has been since 1997. The final duty rate is never known at that
point when it comes across the border.
So Customs is supposed to collect a security deposit from
the importer. And usually that is supposed to be cash, but if
it is a new shipper, it can be a bond instead.
The bond has to be from a company approved by the U.S.
Treasury to issue bonds to secure payments to the United
States. So a big company, like Hartford or Great American or
Washington International, issues the bond for that shipment.
And the bond says, if the importer does not pay this money to
the United States, we will.
The product then goes in. It gets sold. We don't know
anything else about it. And a year or 2 later, the final amount
of the duty assessment becomes known. Typically, it will be 200
percent or so.
And the importer doesn't pay. The importer may have gone
belly up, may have disappeared, may never have existed in the
first place. It may have been a shell corporation or whatever.
So at that point, Customs is supposed to go back to the
insurance company and say we are calling in this bond, pay up.
The conditions for that bond are pretty simple. If the importer
does not pay, the bonding company pays, no ifs, ands, or buts
about it.
That is the whole idea of a bond. It is security. It is a
guarantee. It is supposed to be almost as good as cash. And
that is why the U.S. Government doesn't trust just anybody to
issue these bonds. It is also why the bonding companies charge
importers a lot of money for issuing the bonds.
So the problem is that for some reason Customs is not
getting that bond money. Some of it is supposed to go to the
industries that are harmed by these imports.
The importers sold its products. They got their money. The
bonding company got its premium. They got their money. And the
U.S. industry is left there holding the bag, because Customs is
not doing its job. And this has been going on for over 10
years, as you all well know, because you have been working on
it for about that long.
We are to the point where, depending on which set of
figures you look at, you may have $1 billion or $2 billion in
uncollected duties on things like crawfish, honey, garlic,
mushrooms. Those are the four big ones. Now we have shrimp, as
you just heard.
Out of that, as best we can tell, at least $600 million is
secured by bonds, over 8,000 of those bonds. And of that, we
guess about $150 million is for crawfish.
And so far, Customs has initiated actions to collect about
10 percent of it.
Chairman Landrieu, you and the subcommittee know about this
because you have been trying to get answers and solutions from
Customs for a long time. And last year, you did a great thing
in the July 2014 appropriations report. You asked Customs, on
each order, we want to know the bond number, the date of entry,
the face value, the liquidation status, the date of
liquidation, the amount of principal. Tell us if you have
demanded payment. Tell us if it is in litigation. If so, where
is that litigation? If not, how are you going to get the money?
And so on.
It is a very long list, highly detailed. And we sure
welcome that, because previously, the answers had been mushy.
The deadline for Customs to do that was 180 days from the
date of enactment, which I think is today.
I am about out of time. I need about 1 minute longer, if I
may?
Senator Landrieu. A quick minute.
Mr. Steinberger. We also would like to know about some
money that seems to have disappeared. $6.1 million in crawfish
duties collected in February 2014, we know that. We have copies
of the checks. $14 million collected in April 2014. We know
that, because Customs said so in a letter.
But yet Customs is saying that so far, they think as of the
end of April, there is only $2.7 million to distribute for
2014. We have no idea what happened to the other $20 million.
PREPARED STATEMENT
Chairman Landrieu, human beings are funny critters. We
worry a lot about things like tornadoes and earthquakes, and we
should. They get our attention because they are dramatic. But
more property damage gets done by rust, which never sleeps,
than anything else.
And in human beings, we tend to focus on malice and evil
motives, and we should. But incompetence and lack of initiative
and lack of imagination can produce just as much harm as
malice. It is not as dramatic, but sometimes it is easier to
stop a speeding bullet than it is to get a 10 ton weight to
move when it don't want to move.
We thank you so much for trying to get that weight to move.
Thank you.
[The statement follows:]
Prepared Statement of John Steinberger
Thank you for the opportunity to speak today. I'm John Steinberger,
Of Counsel with the Washington, D.C., law firm of Adduci, Mastriani &
Schaumberg. For many years, I have worked with a partner of that firm,
Bill Leonard, on matters related to the U.S. antidumping duty order
against imports of crawfish tail meat from the People's Republic of
China, which has been in place since September 1997 and is, in my view,
the main reason that Louisiana still has a viable crawfish industry.
The businesses that process crawfish in the United States are
family businesses, mostly, run by ordinary folks, all of them in
Louisiana. It used to be that there were a few crawfish processors in
other states, but they got wiped out by the first avalanche of imports
from China in the late 1990s. To my knowledge, no new processing
operations have been established outside Louisiana since that time.
Our client in the ongoing antidumping case itself, before the U.S.
Department of Commerce and the U.S. International Trade Commission, is
the Crawfish Processors Alliance, a group of 31 crawfish processors,
all in Louisiana, who collectively account for better than 85 percent
of all domestic crawfish processing by volume. In court cases and here
on the Hill, our law firm also represents, as co-counsel with Kelley
Drye & Warren, the individual CPA members who have been eligible to
receive offset payments under the Continued Dumping and Subsidy Offset
Act (CDSOA). In that effort, our crawfish clients are part of a
coalition that includes U.S. producers of honey, mushrooms, and garlic,
each represented by Kelley Drye. Those industries have been having the
same problem with Customs.
The problem is that a huge proportion of antidumping duties that
should have been collected on imports from China that entered the
United States prior to October 1, 2007, have not been collected,
despite the fact that they are secured by bonds issued by large, U.S.-
based insurance companies. That date is important because U.S. law
requires a portion of the duties collected prior to October 1, 2007, to
be paid to domestic producers who have been injured in their business
by the dumping.
People who are unfamiliar with this area of the law are often
surprised that there would still be unpaid duties on goods that came
into U.S. ports in 2007 or earlier. They don't realize that part of
this is just because antidumping duties are assessed retrospectively--
so delays of a couple or 3 years are not shocking. However, we're still
trying, right now in 2014, to get Customs to collect duties on entries
from 2000, 2001, and so on.
Those were very tough years for the U.S. crawfish industry.
Domestic crawfish tail meat was selling around $8.00 or $9.00 a pound,
and even at that price, profits were slim to none. And the local Piggly
Wiggly stores down the road from these processors were full of crawfish
tail meat from China, being advertised quite often at $2.99 a pound.
Now, mind you, at this time, the antidumping duty order was in
place, and it called for imposing antidumping duties running from 91
percent to more than 200 percent. I remember getting faxes. The U.S.
producers would see those ads and tear them out of the paper and fax
them to me with a short, handwritten message at the top along the lines
of ``What is this?'' or ``Why is this happening?'' or ``What about the
duties?'' We know now what was happening: most of the antidumping
duties, which we had fought so hard to have imposed, were not actually
being collected.
People might say they'd rather have Louisiana crawfish than Chinese
crawfish, and they might actually mean it. But everyone has a price.
With such a huge price difference, if you're a U.S. processor, you're
going to be hard pressed to replace that old truck or upgrade your
freezer of pay down your debt. You're just trying to survive another
day. The CDSOA was set up to use the antidumping duties to correct that
problem, but it only works when Customs actually collects what's owed.
Even worse, the people importing the Chinese product--which,
oftentimes, were just shell corporations with no real assets in the
United States--started noticing that they didn't really have to pay the
duties, so they weren't afraid of dumping. Massive volumes of imports
kept pouring in, at very low prices. The hole just got deeper and
deeper.
The responsible Congressional committees have been trying to fix
this problem since at least July 15, 2002, the date of H.R. Report 107-
575, in which the Appropriations Committee said: ``The Committee is
very concerned with the status of tariffs and duties assessed on
crawfish. The U.S. Customs Service is therefore directed to begin,
using funds currently available, vigorous and active enforcement of the
tariff. Additionally, the U.S. Customs Service shall, not later than
April 30, 2003, issue to the Committee and make publically available a
comprehensive report detailing their efforts to enforce and collect
this duty.'' That was in 2002--twelve years ago.
Since then, there have been many, many more attempts by members of
Congress to fix the problems at Customs. In October 2004, the House and
Senate Committees on Appropriations (in Conf. Rep. 108-774 on H.R.
4567) again directed Customs to submit a detailed report, this time by
January 15, 2005. There have been too many inquiries from Senators and
Members of the House to recount here. The answers from Customs,
unfortunately, have almost always been vague and unhelpful.
Last year, as part of the 2014 appropriation for Customs, this
Committee made a number of highly detailed, specific requests for
information from Customs. The details that Customs is supposed to
provide are set out in Senate Report 113-77 (July 18, 2013), which was
originally to accompany H.R. 2217, the Homeland Security appropriations
bill for 2014. H.R. 2217 essentially got rolled into H.R. 3547, the
Consolidated Appropriations Act. Senate Report 113-77 provides for
Customs to provide several highly detailed reports to the Committee not
later than 180 days after the date of enactment. The bill was signed
into law on January 17, 2014. If we take January 17 as the date of
enactment, the 180th day thereafter is July 16, 2014, the date of this
hearing. We are thus eager to know whether Customs is prepared to
supply the requested information and, if so, what it will tell us about
the nature of the antidumping duty collection problem and how to fix
it.
We're also hoping to learn something about what happened with duty
collections last year (fiscal year 2013) and what is happening this
year (fiscal year 2014). More specifically:
--Last summer, Customs released its report on ``Preliminary Amounts
Available to Disburse'' under the CDSOA for fiscal year 2013,
reflecting collections made from October 1, 2012, through April
30, 2013. For crawfish, this ``preliminary amount'' turned out
also to be the final amount, to the penny. In other words,
during the last 5 months of fiscal year 2013, Customs did not
collect a single penny of additional duties out of the vast
backlog owed on entries made prior to October 1, 2007.
--This year, the ``preliminary amount'' for crawfish is only
$2,687,300.70, reflecting collections through April 30, 2014.
Yet we know for certain that Customs collected $6.1 million
from Great American Insurance and Washington International
Insurance, in February of this year, in crawfish antidumping
duties on imports entered during 2000-01. We have copies of the
checks from the sureties. Customs is on record, at the court,
as saying that the checks had been received and were being
processed in late February. It is unclear why this $6.1 million
has apparently not been included in the ``preliminary amount''
for fiscal year 2014.
--Customs has also stated, in a letter to Congressman Boustany dated
April 11, 2014, that it had fully collected ``more than $14
million'' in crawfish antidumping duties on April 7, 2014, one
day before the six-year statute of limitations would have
expired. From other information in the letter, we know that the
money was owed by Hartford, a surety, on entries that came into
the United States well before 2007. Although this money was
allegedly collected prior to the April 30, 2014, cut-off date
for the report on ``preliminary amounts,'' it has obviously
been left out. We do not know why.
In connection with the nomination of the current Commissioner of
Customs, Mr. Kerlikowske, there was to be a liaison designated who
would answer questions such as those I just raised. It is my
understanding from our co-counsel at Kelley Drye & Warren that they
have asked about the missing $6.1 million and $14 million but have
received no answer.
One thing is clear: the problem cannot be solved if no one knows
exactly what it is. Much of the past decade has been spent trying to
get Customs to provide information at a sufficient level of detail that
solutions can be created. The language in the fiscal year 2014
appropriations report was a huge step in the right direction, and we
thank Chairman Landrieu and the rest of the subcommittee for it.
Much remains to be done. Our best information right now is that
there is still more than $600 million in bond money to be collected on
imports of crawfish tail meat, honey, garlic, and mushrooms from China
that entered the United States between May 1998 and August 2006. This
debt is secured by over 8,000 bonds. Yet, so far, Customs has filed
lawsuits to collect on only about one-tenth of those bonds,
representing roughly 12 percent of their face value.
Crawfish antidumping duties account for about $150 million of the
$600 million. Because the amounts payable to domestic producers under
the CDSOA are limited by a formula based on the domestic producers'
expenses, it turns out that most of the $150 million in unpaid crawfish
duties would go directly to the U.S. Treasury if actually collected. We
hope that this committee will continue to work toward that end.
Senator Landrieu. Thank you for that very thoughtful
testimony.
Mr. Blume.
STATEMENT OF RICK BLUME, GENERAL MANAGER, COMMERCIAL
STEELMAKING GROUP, NUCOR CORPORATION
Mr. Blume. Chairman Landrieu and Ranking Member Coats,
thank you for the opportunity to testify before you today. I am
Rick Blume, General Manager of Commercial for Nucor
Corporation.
Nucor is the largest steel producer in the United States.
It is also North America's largest recycler. We have more than
200 operating facilities throughout North America and employ
over 22,000 teammates, including about 200 in Louisiana and
1,400 in Indiana.
Nucor relies on trade remedy laws to combat the unfair
trade practices of our foreign competitors, but we face many
challenges in using these laws.
First, we have to file and win a trade case. This is no
easy task, as cases are complex, burdensome, and notoriously
slow. By the time a final determination is reached, the damage
to the U.S. industry can be irreversible.
More troubling when dumped or subsidized imports are
surging into the U.S. market, which is occurring today across
many of our product lines, our Government agencies do not
always respond adequately.
For example, in a current case against steel rebar, the
Commerce Department found that the Turkish Government is giving
its producers energy subsidies, but then concluded that these
subsidies have no value. This makes no sense, given the energy-
intensive nature of steelmaking.
We disagree with this finding and several of Commerce's
other decisions, and we are urging the agency to correct them
in the final.
Even when we win a case, too often, the dumped products
keep pouring in and causing further injury. After trade relief
was granted on oil country tubular goods from China in 2010,
Chinese producers shifted finishing operations to other
countries to evade the duties.
U.S. pipe producers and their workers suffered as a result,
but so did our teammates at Nucor Indiana in Crawfordsville,
because we supply steel to the pipe and tube industry.
Commerce eventually closed this loophole, but it took 18
months. We should do better.
We have seen this same kind of cheating on everything from
bar grating to mattress springs.
Chinese steel producers also make inconsequential changes
to the chemistry of their steel just to evade the duties. We
can challenge these circumstances, but the process takes years.
U.S. companies and workers deserve to see relief when they
finally win a trade case.
We recognize that Customs has taken steps to strengthen its
trade enforcement, and we appreciate these efforts.
The steel industry partners with Customs to teach U.S. port
inspectors about steel. We travel to several port cities a year
to teach the seminars. This year, we have already been to New
Orleans, Miami, Laredo, and today, in fact, we are in Newark.
Later in the year, we will go to Long Beach.
We also presented a NAFTA-wide fraud seminar here in
Washington for Government and industry officials. Nucor and
other U.S. producers have spent millions of dollars of our own
money to help strengthen enforcement.
Despite these efforts, our trade law agencies can do more.
Nucor strongly supports legislation by Chairman Wyden contained
in the Senate Customs bill. This bill has broad bipartisan
support and would require Customs to investigate industry
allegations of evasion, establish timelines for action, and
issue public reports on the results.
We strongly support Chairman Landrieu's proposal to fight
fraud and increase bonding requirements on importers.
However, we do not believe that replacing the current
retrospective system with the so-called prospective system
would improve enforcement as Customs has suggested.
The current system is the only accurate way to measure the
actual amount of unfair trade. A prospective system would allow
abuse and weaken trade enforcement.
PREPARED STATEMENT
I want to close by emphasizing that Nucor is betting on the
American economy for the long term. Since 2008, Nucor has
invested nearly $8 billion in new and existing U.S. facilities
in order to better serve our customers and the markets. These
investments include our $820 million direct reduced iron
facility in St. James Parish, Louisiana, that started in
December.
So Nucor is doing its part to expand the economy and create
jobs. But we are relying on our government to back us up with
strong trade enforcement.
Thank you.
[The statement follows:]
Prepared Statement of Rick Blume
Chairman Landrieu and Ranking Member Coats, thank you for this
opportunity to testify before you today. I am Rick Blume, General
Manager of Commercial Steelmaking for Nucor Corporation. Nucor is the
largest steel producer in the United States, and is also North
America's largest recycler. Nucor has more than 200 operating
facilities throughout North America and employs over 22,000 teammates,
including about 200 in Louisiana and nearly 1,400 in Indiana.
Nucor relies on trade remedy laws to combat the unfair trade
practices of our foreign competitors, but we face many challenges in
using these laws.
First, we have to file and win a trade case. This is no easy task
as cases are complex, burdensome, and notoriously slow. By the time a
final determination is reached, the damage to a U.S. industry and its
workers can be irreversible.
More troubling, even when dumped or subsidized imports are surging
into the U.S. market--which is occurring today across many of our
product lines--our government agencies do not always respond
adequately. For example, in the current case against steel rebar from
Turkey and Mexico, the Commerce Department found that the Turkish
government was giving its producers energy subsidies, but then
concluded that these subsidies had no value. This makes no sense, given
the energy-intensive nature of steelmaking. We disagree with this
finding and several of Commerce's other preliminary decisions, and we
are urging the agency to correct them in the final determination.
Even when we win a case, too often the dumped products keep pouring
in and causing further injury. After trade relief was granted on oil
country tubular goods (``OCTG'') from China in 2010, Chinese producers
shifted minor finishing operations to other countries such as Indonesia
to evade the dumping duties. U.S. pipe producers and their workers
suffered as a result--but so did Nucor Steel Indiana in Crawfordsville,
and our teammates there--because we supply steel to the pipe and tube
industry. At the request of the U.S. industry, the Commerce Department
closed this loophole, but it took 18 months! We should do better. We
have seen this same kind of cheating on everything from bar grating to
mattress springs. Chinese steel producers also routinely manipulate the
chemistry of their steel to evade duties, by adding boron and other
alloys to hot-rolled steel and plate. We can challenge this
circumvention, but the process takes years. U.S. companies and workers
deserve to see meaningful relief when they finally win a lengthy trade
case.
We recognize that Customs has taken steps to strengthen its trade
law enforcement, and we appreciate these efforts. There is a greater
emphasis on enforcement today. The steel industry actively partners
with Customs to teach U.S. port inspectors about steel and trade
enforcement. We travel to four to six port cities a year to teach these
two-day steel seminars. In 2014, we've already been to New Orleans,
Miami, Laredo, and Newark, and we will go to Long Beach later this
year. We also presented a NAFTA-wide steel fraud and enforcement
seminar here in Washington in April for more than 150 government and
industry officials from Canada, Mexico, and the United States. Nucor
and other U.S. producers have spent millions of dollars of our own
money to help strengthen enforcement.
Despite these efforts, our trade law agencies can do more to
address evasion and circumvention. Nucor strongly supports legislation
sponsored by Chairman Wyden contained in the Senate Customs
reauthorization bill, S. 662. This legislation has broad bipartisan
support and would require Customs to investigate industry allegations
of evasion, establish reasonable timelines for action, and issue
regular public reports disclosing results.
Customs has suggested that changing our duty collection system may
also help. We agree with some efforts, such as Chairman Landrieu's
proposal to increase bonding requirements on importers. However, we do
not believe replacing the current ``retrospective'' system with a so-
called ``prospective'' system would improve enforcement. The current
retrospective system is the only accurate way to measure the actual
amount of unfair trade and determine the appropriate relief. In
contrast, a prospective system would allow abuse on a massive scale and
weaken trade enforcement.
I want to close by emphasizing that Nucor is betting on the
American economy for the long term. Since 2008, Nucor has invested
nearly $8 billion in new and existing U.S. facilities in order to
better serve our customers and the market. These investments include
our new $820 million direct reduced iron facility in St. James Parish,
Louisiana that started up in December. Nucor is doing its part to
expand the economy and create jobs. We are relying on our government to
back us up with strong trade enforcement. Thank you.
Senator Landrieu. Thank you very much.
Mr. Joe Sanroma, is that your family behind you? Would you
like to introduce them, please?
Mr. Sanroma. Yes. This is Donna Sanroma, my wife. She is
also a beekeeper and has been a great support. And Gracie and
Joey Sanroma, my two youngest children.
Senator Landrieu. Assistant beekeepers.
Mr. Sanroma. That is right.
Senator Landrieu. Please proceed.
STATEMENT OF JOE SANROMA, EXECUTIVE COMMITTEE MEMBER,
AMERICAN HONEY PRODUCERS ASSOCIATION
Mr. Sanroma. I want to thank you all for inviting me to
testify.
Chairman Landrieu and members of the subcommittee, my name
is Joe Sanroma. I have been a professional beekeeper for 30
years, and I currently manage two commercial apiaries in
Bunkie, Louisiana, Merrimack Valley Apiaries and Evergreen
Honey Company.
My family also operates Sunshine Honeybees in Louisiana. I
am also president of the Louisiana Beekeepers Association and a
board member of the American Honey Producers Association.
This group represents most of the country's 70 commercial
apiaries that employ thousands of Americans in 38 states. Each
year, these companies work their bees to produce 150 million
pounds of honey and pollinate over 93 vegetable fiber crops
worth $20 billion.
For 20 years, domestic beekeepers have struggled to survive
the ongoing surge of extremely low-priced honey imports from
China.
The Government first imposed antidumping duties on Chinese
honey in 2001 to save our industry.
But until recently, dishonest traders avoided those duties
through a series of fraudulent import schemes.
The most serious of these schemes involved the dumping
law's new shipper bond provision. Until Congress closed it in
2006, that loophole allowed importers to use a Customs bond
instead of cash to meet the substantial collateral required for
certain imports subject to dumping duties.
Customs estimates that it is holding over $600 million in
new shipper bonds as security against unpaid dumping duties on
imports of honey, fresh garlic, crawfish tail meat, and
preserved mushrooms from China. $150 million of these bonds
secure honey imports.
Shockingly, the major insurance companies that issue these
bonds all failed to determine whether the sham companies that
acted as the U.S. importers were creditworthy or to require
that they deposit collateral.
Where Customs eventually assessed substantial duties on
these imports, the importers have disappeared. The insurance
companies collected tens of millions of dollars in premiums for
issuing the bonds, but when Customs demanded payment, the
insurance companies flatly refused.
This duty evasion scheme devastated the domestic producers
in two ways.
First, the scheme allowed the importers to enter and sell
in this country huge volumes of these goods as if the
Government imposing substantial dumping duties did not exist.
As a result, the domestic producers continued to suffer.
Second, U.S. trade law requires Customs to distribute
dumping duties collected on imports that arrive through 2007 to
the injured domestic producers. Thus, some of the injury
inflicted by these imports could have been partially offset by
Customs' distribution of duties collected under the new shipper
bonds. But the insurance companies' refusal to pay as promised
has prevented this.
Unfortunately, Customs must bear substantial responsibility
for this debacle. Although the insurance companies first
started refusing to pay in 2001, Customs by 2009 had failed to
file a single collection lawsuit against them until the
domestic industry sued Customs.
Customs currently is attempting to recover $80 million from
insurance companies through 30 lawsuits. Rather than pay
Customs as promised, the insurance companies are dragging out
those lawsuits by raising many empty defenses. One insurance
company, Hartford Fire, has filed 350 lawsuits against Customs
to avoid paying an estimated $200 million to $300 million under
its bonds.
Despite Customs' recent actions, its extended delay in
suing the insurance companies will likely block recovery under
many bonds because of the statute of limitations.
Indeed, in the first collection lawsuit, the court ruled
that Customs was time barred from recovering $3 million secured
by three of the nine bonds it issued.
Many members who support our domestic producers have worked
to get Customs to account for all new shipper bonds.
Senator Landrieu, we are extremely grateful for your
leadership in this effort. Your effort has started to bear
fruit, but while Customs recently has provided some general
information about the bonds, the agency still has not provided
the detailed accounting the subcommittee requested last year.
PREPARED STATEMENT
We desperately need your continued support and leadership.
Despite this glaring collection failure, beekeepers
recognize Customs' recent exceptional efforts, the most
important of these known as Honeygate. And through that effort,
which is ongoing, Customs has combined with ICE and the Justice
Department attorneys in Chicago to prosecute dozens of those
involved in major duty evasion schemes.
American beekeepers are extremely grateful to these
agencies, including, in particular, Customs for its fine work
on your behalf.
Thank you very much.
[The statement follows:]
Prepared Statement of Joe Sanroma
Chairman Landrieu and Members of the Subcommittee, my name is Joe
Sanroma. I have been a professional beekeeper for 30 years, and I
currently manage two commercial apiaries in Bunkie, Louisiana:
Merrimack Valley Apiaries Inc. and Evergreen Honey Company, which
maintain 26,000 honeybee hives and provide pollination services in
California and along the East Coast.
I'm also President of the Louisiana Beekeepers Association, and a
board member of the American Honey Producers Association--which
represents most of our country's 700 commercial apiaries. These
typically are relatively small, family-owned outfits that collectively
employ thousands of Americans in 38 states. Each year, these companies
work their bees to produce 150 million pounds of honey, and pollinate
over 90 fruit, vegetable and fiber crops worth 20 billion dollars.
Those are services that simply cannot be imported so American
commercial beekeepers--in Louisiana and around the country--play a
crucial role in our country's farm production.
As many of you know, beekeepers have suffered great losses recently
from a widespread decline in bee health that has resulted in beekeepers
losing on average more than one third of their hives in a single year.
Some individual beekeepers have lost two-thirds of their hives. I note
for the Subcommittee that the leading facility doing scientific
research on bee health is the USDA facility in Baton Rouge, Louisiana.
Bee health decline, dubbed by some Colony Collapse Disorder, is an
enormous threat to the industry. But for twenty years, domestic
beekeepers have struggled to survive another threat--the ongoing surge
of extremely low-priced honey imports from China. The government first
imposed antidumping duties on Chinese honey in 2001 to save our
industry. But until recently, dishonest traders avoided those duties
through a series of fraudulent import schemes, and deprived domestic
beekeepers of the protection intended by Congress.
The most serious of these evasion schemes involved the dumping
law's ``New Shipper Bond'' provision. Until Congress closed it in 2006,
that loophole allowed importers to use a customs bond instead of cash
to meet the substantial collateral required for certain imports subject
to dumping duties. For Chinese honey imports, the bond value was twice
the value of the secured imports.
Customs estimates it is holding over 600 million dollars in
thousands of New Shipper Bonds as security against unpaid dumping
duties on imports of honey, fresh garlic, crawfish tail meat, and
preserved mushrooms from China--150 million dollars of which secure
honey imports.
Shockingly, the major insurance companies that issued these bonds
all failed to determine whether the sham companies that acted as the
U.S. importers were creditworthy, or to require that they deposit any
collateral to cover the insurers in case they had to pay under the
bonds. When Customs eventually assessed substantial duties on these
imports, the importers had disappeared. And the insurance companies--
which had collected tens of millions of dollars in premiums for issuing
the bonds--uniformly refused Customs' demands that they pay as
promised.
This duty-evasion scheme devastated the domestic producers of these
four agricultural products in two ways. First, the scheme allowed the
importers to enter and sell in this country huge volumes of these goods
over an eight-year period at steeply dumped prices--as if the
government orders imposing substantial dumping duties on these products
did not exist. As a result, the domestic producers continued to suffer
the very economic injury the dumping duties were supposed to prevent.
Second, all of these imports are subject to a provision of US trade
law, which requires Customs to distribute dumping duties collected on
imports that arrived through 2007 to the injured domestic producers.
Thus, some of the injury inflicted by these imports on the honey,
garlic, crawfish and mushroom producers could have been partly offset
by Customs' distribution of duties collected under the New Shipper
Bonds. But the insurance companies' refusal to pay as promised under
these bonds has prevented this.
Unfortunately, Customs must bear substantial responsibility for
this debacle. Although the insurance companies first started refusing
to pay under these bonds in 2001, Customs by 2009 had failed to file a
single collections lawsuit against them. In fact, the agency filed its
first New Shipper Bond collections lawsuit only after being sued to do
so by the four domestic industries.
Customs currently is attempting to recover $80 million from the
insurance companies through 30 collections lawsuits. Rather than pay
Customs as promised, the insurance companies are dragging out those
lawsuits by raising many frivolous defenses.
One insurance company--Hartford Fire--has raised many of the same
frivolous defenses in 350 lawsuits it has filed against Customs in its
effort to avoid paying an estimated two to three hundred million
dollars under its New Shipper Bonds. Indeed, Hartford Fire's lawsuits
now account for 20 percent of all cases before the Court of
International Trade.
Despite Customs' recent actions to recover under the bonds, the
agency's extended delay in suing the issuing insurance companies will
likely block it from recovering under many bonds. This is because a
bond collections lawsuit must be started within 6 years of the date the
first collection lawsuit, the court ruled that Customs was time-barred
from recovering three million dollars in duties secured by three of the
nine bonds at issue.
Since the domestic producers' lawsuit against Customs was dismissed
by the courts 2 years ago, many Members who support our domestic
producers of honey, garlic, crawfish and mushrooms have worked to get
Customs to account for all of the New Shipper Bonds, and adopt an
effective strategy for recovering from the issuing insurance companies.
Senator Landrieu, we are extremely grateful for your leadership in this
effort, which has started to bear fruit. But while Customs recently has
provided some aggregate and general information about the bonds, the
agency still has not provided the detailed accounting requested last
year by the Committee. We desperately need your continued support to
bring this problem to a successful conclusion.
Domestic beekeepers have been and remain critical of Customs' poor
performance in recovering under the New Shipper Bonds. However, we want
to recognize the exceptional work that agency has performed in recent
years to foil other major duty-evasion schemes on Chinese honey
imports.
The most important of these is known in the trade press as
``Honeygate.'' Through that effort--which is ongoing--Customs has
combined with ICE--Immigrations and Customs Enforcement--and the Office
of the U.S. Attorney of Northern District of Illinois to criminally
prosecute dozens of persons and corporate entities involved in a range
of major duty evasion schemes. As a result of Honeygate, there is, for
the first time in many years, little duty evasion taking place with
Chinese honey imports. American beekeepers are extremely grateful to
these agencies--including in particular Customs--for this fine work on
our behalf. Thank you.
Senator Landrieu. Thank you all for that excellent
testimony.
I am going to ask just quickly the same question to all of
you, and then turn to Senator Coats. I am anxious to get to the
Customs officials, so that we can explore more deeply the
testimony that you have given with them and get them on the
record as to what they are doing or not doing.
So, Mr. Hayes, starting with you, if you could give this
subcommittee one or two immediate suggestions, either
additional authority or additional action that we could take
that would help in the short term, what would it be? And is
there something you can see out in the long term that our
subcommittee should look at to help either make sure these
duties are set properly and collected in a more timely manner
and distributed to those who are injured?
Mr. Hayes. Thank you, Senator Landrieu, and members of the
subcommittee.
In the short term, Madam Chairman, I think one of the main
things we can do is avoid these issues with the new shipper
bonds. That is the primary reason for the massive
undercollection of duties from China.
They are the primary user of these new shipper reviews, and
they take advantage of them to avoid paying the duties.
Right now, they get the benefit of paying these bonds as
opposed to paying the cash deposits. If they are required to
pay the cash deposits, they would be less likely to form these
shell import companies that disappear.
So I think that is one of the main things that we can do.
And your legislation asks Commerce and Customs to take a look
at that.
Senator Landrieu. And when were the new shipper bonds
implemented, and what committee gave them that authorization?
Mr. Hayes. Madam Chairman, I am not exactly sure. It may be
part of the original Trade Act legislation as it was amended
over time, but I am not exactly sure. I would defer to maybe
one of my other colleagues who might know the answer to that.
But it may be in the original Trade Act legislation, as
amended.
Senator Landrieu. Okay, so the old system required cash to
be put up. The new system allowed a bond.
Mr. Hayes. Correct.
Senator Landrieu. And the bonds are not being appropriately
cashed and delivered to those injured.
Mr. Hayes. Correct. And the new shipper process allows
either a new shipper or a company that has changed hands to go
in and say, ``We are a new company. We shouldn't be subject to
the same dumping rate that the other providers are.''
They get an advantage for just making that allegation. They
get to post these bonds as opposed to paying the cash rate that
all the other producers need to pay.
If they pay the cash rate and then, due to our
retrospective system, it turns out that their duty is lower,
they get the money back. So there is nothing unfair about it.
It is just that allowing them the opportunity to have these new
shipper bonds causes real problems, not just from our
perspective, but, certainly, with Customs as it presents some
collection challenges.
I think one of the other immediate things, and there are
tons, Chairman Landrieu, but I will just give you another one.
The suggestion of the advisory committee on collections I think
it is very important. Having industry voice on that committee
is key.
Right now, it is made up mostly of importers, and having
industry representatives with a vested interest in seeing these
laws enforced is key. And I know there are many other detailed
ones that I would love to get into, but that is certainly one
that I think could bear fruit rather quickly.
Senator Landrieu. Thank you for giving those two.
Mr. Steinberger, we will ask you for two or three, and all
the other good ideas you have. This record is going to stay
open for 2 weeks, so you can submit them in writing to us.
Mr. Hayes. I appreciate that opportunity, Chairman.
Senator Landrieu. Mr. Steinberger.
Mr. Steinberger. Thank you for the question.
Short term and long term, I am trying to sort those out.
Short term, absolutely insist on answers to the questions that
are already on the table. As I mentioned earlier, I believe
today is the day that some very highly detailed accounting was
requested. And in the past, Customs has dragged its feet and
been very vague in its answers.
Those answers are important because no one can solve this
problem until we know what it is. For 10 years, we have been
trying to figure out what is it, what is this issue? So that is
one thing.
A solution that I have always been fond of is take it out
of Customs' budget, if they can't collect the money. In private
industry, that would be done. You get your budget cut if you
don't get your job done.
More practically speaking, improved disclosure in every
possible way. There are private services like PIERS. There is
one I like called Panjiva. They use bill of lading data. And
you can get information about shipments down to the container
number, and yet Customs still treats this kind of information
as some kind of big secret. That has hobbled our efforts for a
long time in finding out what is going on.
One final thing, try to look hard at the insurance
companies that are issuing the bonds. And if you have one out
there that is failing to pay by mounting frivolous defenses,
and believe me, there are frivolous defenses to these bonds,
cut them off. Say you can't issue bonds to the United States
Government anymore.
Those are the ones I can think of.
Senator Landrieu. Excellent.
Mr. Blume.
Mr. Blume. Chairman Landrieu, two or three things that I
would state I think are opportunities for improvement. First of
all, I would agree in terms of transparency. In many cases,
when there are allegations of fraud and circumvention, and
evidence of that, in many cases, there is not sufficient
feedback given back to the industry, so that we understand that
action is being taken and that the circumstances are being
taken very seriously. So I would say transparency is a key term
to think about.
The other key point I would add is the urgency of the
matter. Evasion itself should be addressed much more quickly
than it is, recognizing that given the timeframe that is taken
to win a trade case, and then ultimately to have evasion occur,
in many cases, much of the damage is already done during the
process of winning the trade case. So then to add insult to
injury, the evasion and circumvention needs to be addressed.
And there needs to be, in our view, an urgency around that
issue.
And I think the final thing obviously to do an effective
job in many cases, it takes greater resources, and commitment
to stopping the evasion and the circumvention that is
occurring.
Senator Landrieu. Okay, and, Joe, just really quickly, so I
can get to my ranking member, but I would love your answers,
the one or two things we could do.
Mr. Sanroma. I would say, first and foremost, to collect
the remaining bonds that we need, because our industry has
suffered for 20 years, through this economic injury. And as
soon as we got relief a little bit from that, we immediately
went to colony collapse disorder (CCD). And we really need to
rebuild our industry back up to where it needs to be to support
the agricultural industry.
So we really need to collect those bonds.
Second, to continue the efforts through ICE to keep this
from happening again.
Senator Landrieu. Thank you very much.
Senator Coats.
Senator Coats. Madam Chairman, I am glad that we have the
Government witnesses here. I think it is constructive for each
side to listen to each other. I am looking forward to their
responses. I guess a couple words that come to my mind, based
on what has been said here, is transparency, communication,
quicker resolution to some of the issues would all be very,
very helpful.
Constructive suggestions as to how we can get to that point
is probably going to involve a lot of interaction between both
the Government agencies as well as the private sector.
So this is a good place to start and hopefully one of the
things we will take away from all this is that the doors are
open for further discussion in terms of how we can do this
better. It is a benefit for the private sector, obviously, but
is also a benefit for the Government in terms of being able to
address their mission in a more timely and effective way.
Mr. Blume, I wanted to ask a little bit about your program
where you reach out to the port inspectors about trade
enforcement. Is that an effort that is in cooperation with the
agencies?
From a practical standpoint, how does this work? Do you
need to get a permit? Do you need to get permission? Is this
something that is a joint public-private initiative? Or
something just taken on behalf of the steel industry?
Mr. Blume. Senator Coats, I think, by and large, the
initiative came from the steel industry itself recognizing that
steel in many cases can be a complex product, so there was a
recognition that we needed to help inform, help work with
Customs at the various ports to make sure there was a clear
understanding about steel products, what changes a steel
product.
For instance, I mentioned earlier some of the
inconsequential alloying that occurs from some of the Chinese
producers simply to get around a duty. And so in doing so, it
is important that we help educate, we help inform the Customs
officials through these programs.
So we saw a lot of different types of circumvention,
including the alloying issue, but also, frankly, mislabeling,
so understanding the difference between wire rod and plate.
Some of that is very obvious, but some of it is not. Some of
these circumvention schemes are very sophisticated.
So that was primarily an industry sponsor, but we have had
broad participation from Commerce and from the Customs
officials.
Senator Coats. So they have been very receptive of the
effort?
Mr. Blume. Yes, it has been a very successful program.
Senator Coats. I don't know if any of the other industries
do that kind of thing, but it sounds like----
Mr. Hayes. Senator Coats, if I may, we don't in aquaculture
and agriculture industry, but that certainly is an example that
we are looking at. Because of the problems we are having in
that industry, we are going to use the steel industry as an
example and work with Senator Landrieu and Senator Cochran to
try to have some of those not fact-finding but instructional
presentations at the various ports of entry to make sure that
they know what they are looking for.
But if I may, Senator Coats, just really briefly on
transparency, one of the things short term that we can do is,
you mentioned transparency and communication. Right now, we are
operating almost in three separate corridors: Customs,
Commerce, and the industry.
Now, Commerce and Customs do share information, and they do
work well together in their separate spheres. But the industry
doesn't really have an opportunity to influence and to give our
information that we might have to them. And one of the things
that I think comes out in the legislative language is that if
we can have some type of a process where we can share business
proprietary information under an administrative protective
order, where we might have information or Customs might have
information that can help enforcement, safety, various numbers
of things.
We have the vested interest in enforcing these laws. And if
we can put some type of procedure in place to effectuate that
communication, I think it is going to go a long way to help in
the process.
And I apologize for taking your time, responding to your
first point.
Senator Coats. Thank you. Just real quick, Mr. Sanroma,
there has been a lot of news lately about a bee shortage, not
getting the pollination that we need for agricultural purposes,
and so forth. Is this a direct result of importing honey, and,
therefore, the honey industry declines domestically because
imports are putting other people out of business? Do the two
match up at all?
Mr. Sanroma. These are two separate incidents here. This
was our first problem at hand for many years, for 20 years,
this economic problem through China dumping their honey here at
extremely steep prices. And then, until recently, we had this
new phenomenon, colony collapse disorder. That is more related
to other factors.
There are several theories out there. Like pesticides is a
leading one for that.
Senator Coats. Okay, thank you.
Senator Landrieu. Thank you.
Senator Cochran.
Senator Cochran. Madam Chair, thank you. Let me join you
and Senator Coats in welcoming the panel and thanking you for
bringing some of these problems that are very serious to the
attention of our subcommittee.
I think you can be assured that as a result of today's
exploratory hearing, which is what I think of it as, I think
there is a lot more that needs to be done, in terms of getting
facts and understanding how the competitors are misusing U.S.
laws to make it difficult for American competitors to compete
and to sell what they are producing and what they are making
available in the market.
So I think this is the beginning of a serious effort to try
to find out more and then make sure we are an influence for the
purpose of enforcement of U.S. laws to benefit U.S. suppliers,
competitors, and marketers of very valuable and important
commodities.
Thank you.
Senator Landrieu. Thank you very much.
And last, I just want real, real quick, each of you, in
your specific industry that you came here to testify about,
which country or countries, list no more than three, are the
most egregious violators? So what would it be for shrimp and
crawfish?
Mr. Hayes. It would be China, by far, Madam Chairman.
Senator Landrieu. Okay.
How about you, Mr. Steinberger.
Mr. Steinberger. Absolutely China. In fact, crawfish is
only made in three countries, the United States, Spain, and
China. Spain has not been a big problem. China is the big
problem.
Senator Landrieu. Mr. Blume.
Mr. Blume. Madam Chairman, certainly, I would agree. China
is the big problem. But we also have serious issues with Korea
and Turkey as well.
Senator Landrieu. Mr. Sanroma.
Mr. Sanroma. The biggest problem that we would have is with
China as well.
Senator Landrieu. Okay. Thank you all very, very much for
your testimony. We hope that you all can stay and listen to the
testimony of CBP and ICE. And if you can't, we understand.
Thank you all very much.
As the second panel comes forward, so that we can keep this
moving, let me introduce the Acting Assistant Commissioner,
Office of International Trade, Richard DiNucci, U.S. Customs
and Border Protection; next, Acting Assistant Commissioner,
Office of Field Operations, John Wagner, who is here to answer
questions only; and then Assistant Director of International
Affairs, Lev Kubiak, U.S. Immigration Customs Enforcement with
ICE.
And if you all will take your seats, we will continue with
this important hearing. I would like to try to wrap up, if we
can, a little bit after 4 o'clock.
And so I think we can begin with you, Mr. DiNucci. We will
limit your statement to about 5 minutes.
STATEMENT OF RICHARD DINUCCI, ACTING ASSISTANT
COMMISSIONER, OFFICE OF INTERNATIONAL
TRADE, CUSTOMS AND BORDER PROTECTION
ACCOMPANIED BY JOHN WAGNER, ACTING ASSISTANT COMMISSIONER, OFFICE OF
FIELD OPERATIONS, CUSTOMS AND BORDER PROTECTION
Mr. DiNucci. Thank you very much, Chairman Landrieu,
Ranking Member Coats, members of the subcommittee. It is,
indeed, an honor to be before you today with Mr. Wagner, our
Assistant Commissioner for the Office of Field Operations, and
my colleague Lev Kubiak, who is the Director of the IPR
Intellectual Property Rights Center commercial fraud efforts
over at ICE Homeland Security Investigations (HSI).
Later this month, we celebrate the 225th anniversary of the
U.S. Customs Service, its establishment, its importance to the
history of our Nation, and its continued importance today as
part of CBP's complex trade mission.
I would like to start by thanking the subcommittee for the
support of CBP. CBP demonstrated the need for approximately
4,373 additional officers with our workload staffing model, and
you responded by funding 2,000 officers in the 2014
Appropriations Act, and by supporting a partial increase in
user fees in the fiscal year 2015 DHS appropriation bill that
will provide an additional 1,000 officers. So we wanted to
thank you very much for that.
Studies have shown the direct economic benefits realized by
increasing staffing at our ports of entry, and strategic
alignment of staffing is part of CBP's trade transformation
initiative to modernize our trade functions and securely
facilitate the increasing volume of international trade.
CBP is responsible for enforcing nearly 500 U.S. trade laws
and regulations on behalf of 47 separate Federal agencies. We
managed 30.4 million commercial transactions in fiscal year
2013. That generally increases by 4 percent to 6 percent each
year. It represents approximately $2.4 trillion in imports. We
generate about $40 billion in duties, fees, and taxes.
Illegal trade activities threaten the competitiveness of
U.S. business, national security, and consumer health and
safety. In collaboration with U.S. Immigration and Customs
Enforcement, specifically Homeland Security Investigations, CBP
works to identify and detect fraudulent trade activities,
including evasion of lawfully owed duties; importation of
counterfeit, pirated, and unsafe merchandise; and false claims
for free trade agreement benefits for imported merchandise.
Collecting antidumping and countervailing duties, referred to
as AD/CVD, and identifying importers who evade them is a
priority trade issue for CBP.
Evasion schemes, such as illegal transshipment and use of
shell companies to avoid payment, complicate an already complex
system of collecting those duties. Our use of single
transaction bonds, tactical audits, lab testing, and special
operations has increased our ability to detect and deter AD/CVD
evasion. And our continued efforts to increase the depth of
information we collect from the importing community will help
CBP screen for shell companies and detect and deter future
evasion.
Strengthening our trade intelligence and our targeting
enterprise is critical to our trade enforcement mission and a
key aspect of our CBP trade transformation.
We thank Congress for the support in Federal statutes such
as the Trade Act of 2002 and the Safe Port Act support for
CBP's trade targeting programs by mandating the provision of
advanced trade data on cargo shipments prior to vessel lading.
CBP's National Targeting Center for Cargo (NTCC) is a
critical centerpiece to our trade targeting regime. The
analytic process at the NTCC provides uniform review of cargo
shipments for identification of the highest threat shipments
and presents data in a comprehensive, flexible format to
address specific intelligence threats and trends before
shipments reach the United States.
Additionally, we have been joined now by Homeland Security
Investigations (HSI) in establishment of an NTCC investigations
division, which will enhance collaborations to support
investigations targeting interdictions, advancing shared
security missions between CBP and ICE.
The NTCC is supported by our National Targeting Analysis
Groups (NTAGs). NTAGs are CBP's primary national trade
targeting assets. They focus on specific issues, antidumping/
countervailing duty being one of those issues.
NTAGs provide in-depth analysis for high-risk priorities
such as intellectual property rights and antidumping. The NTAGs
work in concert with our Centers of Excellence and Expertise,
and the National Targeting Center, to address the entire cycle
of trade enforcement, including information intake, analysis
targeting, investigative case support, and operational
assessment.
CBP's Centers of Excellence and Expertise continue to
increase CBP's trade intelligence capabilities, while
modernizing the way we interact with the industry. U.S.
industry representatives share valuable market and product
intelligence with us, and we work closely with the trade
community to increase our understanding of unique trading
environments and potential risks and illicit trade practices.
In 2008, to facilitate the process for the trade community
to provide us with critical information on potential unfair or
illegal practices, CBP created an online referral process
called e-Allegations. Since its inception, CBP has received
more than 9,000 commercial allegations via the e-Allegations
system.
PREPARED STATEMENT
The Commercial Target Analysis Center located here in DC
facilitates information sharing among 11 participating
Government agencies to streamline and enhance Federal efforts
to address import safety. We were joined on the 16th of June
this year by our Consumer Product Safety Commission and Food
and Drug Administration at the CTAC Commericial Targeting and
Analysis Center.
All these collaborative efforts improve our ability to
enforce CBP's efforts and the trade laws, antidumping,
intellectual property, free trade agreements.
Thank you, Chairman.
[The statement follows:]
Prepared Statement of Richard Dinucci
Chairwoman Landrieu, Ranking Member Coats, and Members of the
Subcommittee, it is an honor to appear before you today to discuss U.S.
Customs and Border Protection's (CBP) role in facilitating
international trade and enforcing our trade laws.
CBP has a dual mission of protecting national security objectives
while facilitating legitimate trade and travel, and plays a vital role
in promoting the country's economic prosperity and security. CBP is the
second largest revenue collecting source in the Federal government and
our operations have a significant impact on the security and
facilitation of legitimate international commerce and America's
economic competitiveness.
Our trade mission is highly complex. We are responsible for
enforcing nearly 500 U.S. trade laws and regulations on behalf of 47
Federal agencies, facilitating compliant trade, collecting revenue, and
protecting the U.S. economy and consumers from harmful imports and
unfair trade practices. Fraudulent trade activities, including the
import of counterfeit and pirated goods, threaten America's innovation
economy, the competitiveness of our businesses, the livelihoods of U.S.
workers, and, in some cases, national security and the health and
safety of consumers.
Annually, CBP manages over 300,000 active unique importer-of-record
numbers, accounting for 30.4 million commercial transactions, which
represents approximately $2.4 trillion dollars in imports and generates
over $40 billion dollars in duties, fees and taxes. In addition to
applying the multitude of daily tariffs and the processing of mass
amount of commercial shipments, CBP must also consider the complexities
of enforcing U.S. Free Trade Agreement (FTA) commitments. The United
States has existing FTAs with 20 countries and is currently negotiating
the Trans-Pacific Partnership Agreement with 11 Asia-Pacific region
countries, and the Transatlantic Trade and Investment Partnership (T-
TIP) with the European Union. These are important agreements for the
United States that will promote U.S. international competitiveness,
jobs, and growth. In fiscal year 2013 alone, FTAs accounted for over
$676 billion in imports.
cbp's layered trade enforcement strategy
As the nation's border enforcement agency, CBP is responsible for
detecting and interdicting goods imported to, exported from, and
transiting through the United States by means of fraudulent trade
activities intended to avoid the payment of duties, taxes and fees, or
activities meant to evade U.S. legal requirements for international
trade. Central to all of CBP's multi-layered trade enforcement
activities are the continuous enhancements to our targeting programs,
the expansion of our trade intelligence, and our ability to identify
and understand trade risks whether they affect national security, U.S.
business competitiveness, or the collection of revenue. We obtain
information about shippers, producers, importers, cargo and vessels, as
early as possible in the shipping process. Using advanced targeting
techniques, we build and maintain a knowledge base about the people,
companies, facilities, conveyances and cargo involved in the supply
chain.
Enforcement of trade laws and interdiction of illegal cargo are
based on advanced risk-based targeting. CBP performs targeting
activities throughout the import process--depending on the pathway--
prior to departure from origin, before cargo arrives at a port of
entry, at time of entry, and after the cargo is conditionally released.
In accordance with the Trade Act of 2002, Public Law 107-210, and the
SAFE Port Act of 2006, Public Law 109-347, carriers are required to
submit manifest data containing an inventory of all goods, supplies,
cargo, and persons on board a conveyance or container in advance of
arriving at a port of entry. Filers submit entry/entry summary
information to declare specific commodity information to CBP for
clearance and payment of duties, and the manifest and entry information
is integrated into ``shipments'' for vetting through CBP's Automated
Targeting System (ATS). ATS is a critical decision support tool that
CBP uses to assess the risk of goods entering the United States. ATS
incorporates information from other CBP systems, as well as, other law
enforcement databases to use in its risk assessment. ATS provides a
uniform screening of all its cargo transactions and identifies
anomalies based on numerous risk factors.
Shipments matching ATS targeting factors are presented to CBP
officers assigned overseas with the Container Security Initiative
(CSI), targeters at our numerous Advance Targeting Units (ATUs) located
at our domestic ports of entry (POEs), as well as our seasoned experts
at the National Targeting Center for Cargo Operations (NTC-C). Upon
arrival of cargo at a port of entry, using targeting results to
prioritize inspection of high risk cargo, CBP has the authority to
perform an exam of the goods; detain, seize, or request re-export of
the goods; or release the goods. In the post-entry environment, CBP
assesses duties, determines statutory and regulatory compliance, and
collects import statistics. Effective targeting not only enables CBP to
detect and address potential risks before a shipment arrives at a port
of entry, but it also enables CBP to separate low-risk and legitimate
shipments from those that require additional scrutiny.
When it comes to targeting shipments for potential threats to
consumer safety, the Commercial Targeting and Analysis Center (CTAC) is
a CBP facility designed to streamline and enhance Federal efforts to
address import safety issues. Created in 2009, the CTAC facilitates
information sharing amongst 11 participating government agencies
(PGAs),\1\ while simultaneously developing, implementing and
streamlining cohesive import-safety enforcement procedures that drive
further interdiction of harmful and inadmissible goods. Supporting
CBP's unified trade targeting mission, the NTC-C has an embedded
presence at the CTAC facility, driven to heighten the connectivity
between the PGAs admissibility mission and the NTC-C's 24/7 operational
capabilities.
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\1\ The 11 Federal agencies that participate in the CTAC include:
CBP; U.S. Consumer Product Safety Commission; U.S. Department of
Agriculture Animal Plant Health Inspection Service; Food Safety and
Inspection Service; U.S. Immigration and Customs Enforcement Homeland
Security Investigations (ICE/HSI); U.S. Environmental Protection Agency
(EPA); Pipeline and Hazardous Materials Safety Administration (PHMSA);
National Highway Traffic Safety Administration (NHTSA); Food and Drug
Administration (FDA); U.S. Fish and Wildlife Service (FWS); and the
National Marine Fisheries Services (NMFS).
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The National Targeting and Analysis Groups (NTAGs) are the primary
national trade targeting assets for CBP. NTAGs provide in-depth risk
analysis for high priorities such as Intellectual Property Rights (IPR)
and Antidumping and Countervailing Duty (AD/CVD). The NTAGs work in
concert with the Centers of Excellence and Expertise (CEE), and the
NTC-C Tactical Trade Targeting Unit (T3U), to enhance trade targeting
expertise. These entities work with the entire cycle of trade fraud
enforcement--from information intake, analysis, targeting,
investigative case support, and operational assessments.
Trade intelligence is vital component of effective trade targeting.
The establishment of the NTC in December 2001, and the development of
partnerships with other agencies, both domestically and abroad, has
enabled real-time information sharing between agencies and governments.
Partnerships with Immigration and Customs Enforcement Homeland Security
Investigations (ICE/HSI), the Drug Enforcement Administration (DEA),
the Financial Crimes Enforcement Network (FinCEN), and the Departments
of Commerce (Commerce) and Health and Human Services (HHS) promote
information sharing and the exchange of best practices. Collaboration
with foreign governments results in seizures and detection of threats
at our borders and in foreign ports.
The trade community is an essential element to expanding CBP's
trade intelligence. Through collaboration with industry, CBP deepens
its understanding of the way business and industry operates in the ever
changing global marketplace and leverages that information for risk
analysis and targeting. CBP has developed effective working
relationships with many U.S. industries, which regularly provide
intelligence on specific companies and imports as well as technical
commodity information. Key to CBP's collaboration with industry and our
efforts toward building bi-directional trade education are CBP's 10
Centers of Excellence and Expertise (CEEs). The CEEs are redefining how
CBP works collaboratively with industry members to understand trade
risks. By focusing on industry-specific issues, CBP is able to provide
tailored support to unique trading environments. The CEEs are helping
to increase uniformity and expertise across CBP for the administration
of industry-specific trade enforcement. The CEEs are just one of CBP's
Trade Transformation Initiatives supporting CBP's efforts to target the
evasion of U.S. trade laws, protect the revenue of the U.S. Government,
and ensure a level playing field for U.S. industry.
Each of these entities brings a particular targeting skill set to
the table. For example, by virtue of the CEEs industry-based knowledge,
CBP can utilize critical trade intelligence in our enforcement efforts.
Additionally, because of the NTAGs' expertise, CBP can better
understand the overlapping risk areas within each industry sector.
Integrating these knowledge areas is an enforcement priority for the
agency. By creating a common operating picture that identifies risk
within the trade arena, CBP can quickly act on fraudulent trade
schemes. Moreover, by leveraging expertise within each targeting unit,
CBP deepens its trade enforcement posture, resulting in more effective
outcomes. For example, in fiscal year 2014, referrals from the T3U
resulted in 179 seizures with a Manufacturer's Suggested Retail Price
(MSRP) value of over $5.3 million.
Integration of these national targeting groups is crucial, as each
provides support for our law enforcement partners, such as ICE/HSI
Agents assigned to the newly formed National Targeting Center for
Investigations (NTC-I). Partnerships between T3U and NTC-I personnel
are leveraged as a force multiplier which has resulted in more
effective sharing of information and increased outcome-based
enforcement actions. For example, in fiscal year 2014, the T3U
supported $60.7 million total MSRP from HSI case work, including 31
criminal arrests, 10 indictments, 8 convictions, 35 search warrants and
3 administrative arrests.
antidumping and countervailing duty: a priority trade issue
In the performance of its trade enforcement operations, CBP has
identified several high-risk areas, designated as Priority Trade Issues
(PTI) that can cause significant revenue loss, harm the U.S. economy,
or threaten the health and safety of the American people. PTIs drive
risk-informed investment of CBP resources and enforcement and
facilitation efforts, including the selection of audit candidates,
special enforcement operations, outreach, and regulatory initiatives.
The five current PTIs are Intellectual Property Rights; Textiles and
Apparel; Import Safety; Trade Agreements; and Antidumping and
Countervailing Duties (AD/CVD).
Under the Tariff Act of 1930, U.S. industries may petition the
government for relief from imports that are sold in the United States
at less than fair value (``dumped'') or which benefit from subsidies
provided through foreign government programs. Under the law, the U.S.
Department of Commerce determines whether the dumping or subsidizing
exists and, if so, the margin of dumping or amount of the subsidy. The
United States International Trade Commission determines whether there
is material injury or threat of material injury to the domestic
industry by reason of the dumped or subsidized imports. AD/CVD has been
identified by CBP as a PTI because collection of these duties is
critical to the U.S. economy and U.S. business competitiveness.
While the vast majority of manufacturers, importers, customs
brokers, and other parties involved in shipments of goods subject to
AD/CVD orders accurately provide their shipment information to CBP and
lawfully pay the duties due, CBP has a core statutory responsibility to
collect all revenue owed to the U.S. Government that arises from the
importation of goods. CBP's AD/CVD trade program works to ensure that
CBP implements a concerted, systematic approach to detecting and
deterring the circumvention of AD/CVD laws, and liquidating
transactions in a timely and accurate manner, while facilitating
legitimate trade.
ad/cvd collection challenges
CBP's principal challenges with AD/CVD collection include
identifying and eliciting payment from the small minority of non-
compliant importers--while facilitating the larger universe of
compliant importer shipments--and the nature of the AD/CVD system.
Some importers are unwilling or unable to pay the actual duties,
and some are no longer in business when CBP issues a bill, leading to
uncollected AD/CVD. Other importers, often in the form of shell
companies and foreign non-resident importers, have no intention of
paying any final duties, and disappear as soon as there is any
indication that final duties may increase. This is particularly true
for AD/CVD orders covering imports from China, and Chinese agriculture/
aquaculture imports in particular. In fiscal year 2013, uncollected AD/
CVD on imports from China accounted for 95 percent of the uncollected
AD/CVD.
In addition, some importers participate in schemes to intentionally
evade AD/CVD liabilities. Evasion schemes take on several forms and
often involve the collusion of multiple parties, including the
manufacturer, shippers, and the importer. Several schemes, like the
ones listed below, may be used simultaneously, to avoid AD/CVD
liability and further complicate detection efforts:
--Transshipment involves the illegal manipulation of products,
packaging, documents and shipping logistics to disguise the
true country of origin of a product.
--Undervaluation is the falsification of documents and declarations
to reduce the amount of AD/CVD a company must pay. Beyond the
suspicion of undervaluation, it can be difficult to
sufficiently prove that it is occurring, especially if there is
collusion between the producer and importer to create false
values.
--Failure to manifest (i.e. smuggling) is when a company does not
declare goods on its entry documents in order to avoid paying
AD/CVD duties.
--Misclassification involves improperly declaring goods with the
proper duty classification, or mis-describing the goods to
avoid suspicion of dumping. This is easier to detect and
address than other schemes, but is often used in combination
with another scheme such as transshipment, so that it may still
appear to fall outside the scope of an AD/CVD case.
A particularly challenging scheme importers use to evade AD/CVD is
employing ``shell companies,'' which are companies with no assets or
physical presence in the United States, as a primary means of avoiding
payment. In addition, CBP has limited legal recourse in collecting
debts from importers located in other countries. When CBP cannot
collect from the importer, the amount of the bond is often insufficient
to cover the additional duties--which can rise above 400 percent of the
dutiable value. While the use of bonding as security for the payment of
AD/CVD is convenient for the trade, it also presents a set of
challenges to the Government, such as legal challenges from sureties
whose bonds secure AD/CVD bills. Further, while bonds can provide some
assurance to the U.S. Government that duties will be paid, setting
bonding levels for AD/CVD imports is a challenge for CBP because the
final duty liability and payment risk are unknown at the time of
importation of AD/CVD entries. Moreover, bonding alone simply cannot
mitigate all of the serious collections issues posed by the current
retrospective AD/CVD system.
Internally, the current automated import system used by CBP, the
Automated Commercial System (ACS) also provides AD/CVD enforcement
challenges. ACS is not designed to track and record AD/CVD liquidations
that occur by operation of law, nor does it afford CBP the ability to
determine with absolute certainty the amount or existence of single
transaction bonds (STBs). However, the continued deployment of CBP's
Automated Commercial Environment (ACE) will address these challenges.
All of these challenges affect CBP's ability to collect owed
duties. Despite these challenges, CBP actively pursues collection of
all unpaid AD/CVD claims against delinquent importers and sureties.
ad/cvd enforcement
CBP is constantly developing new AD/CVD enforcement protocols to
meet the challenges posed by the increasing complexity of AD/CVD
evasion schemes. As with other trade areas, quality intelligence and
advanced targeting is key to effective enforcement. CBP identifies
potential evasion by working with U.S. industry, ICE/HSI, other U.S.
government agencies, and our international partners to develop new
sources of information to identify AD/CVD circumvention.
To detect AD/CVD evasion, CBP employs significant assets from
across the Agency and uses many tools, including import trade trend and
valuation analysis, the use of targeted reviews and audits, lab
testing, and special operations. In fiscal year 2013, CBP completed 88
AD/CVD audits covering multiple importers of AD/CVD commodities.
Through these audits, CBP identified AD/CVD discrepancies with a value
of approximately $71 million, and has collected over $46 million. CBP
is continuing to pursue collections on all money owed to the U.S.
Government.
Another effort CBP is pursing to enhance its trade enforcement
capabilities is increasing the quality and integrity of the information
collected from the importing community. Additional information would
assist CBP in addressing the significant challenge of identifying shell
companies who avoid paying large sums of duty, including AD/CVD. CBP is
in the process of revising a key importer form to require additional
information. With these revisions, CBP expects that it will become more
knowledgeable about new importers and be better equipped to screen for
shell companies and improve risk assessment for targeting of shipments.
The revised form seeks to capture more detailed company information,
and more information about individuals involved, such as the importer,
company officer, and sole proprietor of the goods being imported. Early
identification of shell companies can improve targeting (and ultimately
collection), while link analysis can allow better monitoring of
behavior that deviates from the corporate identity presented to CBP.
Invaluable to the enforcement of all trade laws, CBP's Laboratories
and Scientific Services Directorate (LSSD) has been part of trade
enforcement since 1841. LSSD plays a key part in the enforcement of
such disciplines as AD/CVD, classification, value, transshipment,
intellectual property rights and counterfeit materials and finished
products. In fiscal year 2013, this division handled 1,298 samples
relating to 766 cases of importations of suspect AD/CVD violations.
LSSD analyzes a wide range of commodities, including honey, garlic,
plastic carrier bags, steel, bearings, wax candles, paper, pasta,
hardwood and decorative plywood, and mushrooms.
One of CBP's most valuable partners in AD/CVD enforcement is the
trade community. U.S. industry, trade associations, and importers
provide critical insight to CBP on enforcement issues related to
developments in AD/CVD and other trade sensitive imports, and advise
CBP staff on the latest industry-wide changes for such commodities. CBP
meets regularly with U.S. industry representatives to discuss AD/CVD
circumvention schemes, and U.S. industry representatives share valuable
market and product intelligence with us. Partnerships with the trade
community are critical to rooting out unfair trading practices. The
trade community provides market intelligence and commodity expertise to
identify unfair trading practices or illegal trading activity.
In order to facilitate the process for the trade community to
provide us with this critical information, we created an online
referral process called e-Allegations. Since e-Allegations inception in
June 2008, CBP has received more than 9,784 commercial allegations via
www.cbp.gov. Nearly 10 percent of these allegations are AD/CVD-related.
Every allegation submitted through e-Allegations is reviewed and
researched to determine the validity of the trade law violation(s)
being alleged. Some are reviewed and resolved internally within CBP,
and some are referred to ICE for further investigation. All allegations
that include contact information are followed up to develop more
information and to allow CBP to keep the allegers of our enforcement
progress.
ad/cvd collection efforts
CBP, in collaboration with ICE/HSI, has had increasing success in
identifying, penalizing, and disrupting distribution channels of
imported goods that seek to evade AD/CVD. CBP personnel refer many
cases of AD/CVD evasion to ICE/HSI for criminal investigation and,
after building the cases until they are ready for investigation, CBP
works closely with ICE/HSI to establish the evidence of criminal
violations. In fiscal year 2013, ICE/HSI criminal investigations, with
CBP support, successfully disrupted distribution networks of numerous
types of imported Chinese goods evading AD/CVD, including:
--Operation Honeygate, where ICE/HSI, in collaboration with CBP,
exposed a criminal network responsible for evading $180 million
in antidumping duties on imported Chinese honey. Several
individuals were imprisoned for their criminal activities and
two of the nation's largest honey suppliers paid millions of
dollars of fines.
--An ICE/HSI investigation with substantial CBP support that
culminated in the criminal indictments of Chinese, Taiwanese,
and U.S. companies and company officials for illegally
transshipping lined paper from China in order to evade over $25
million in antidumping duties.
--ICE/HSI agents working jointly with CBP offices arrested five
individuals and indicted three companies who allegedly
participated in a conspiracy to illegally import aluminum
extrusions from China transshipped through Malaysia to avoid
over $25 million in AD/CVD duties.
CBP's targeting and enforcement activities are applied at every
stage in the import process. Numerous enforcement activities related to
AD/CVD enforcement occur at our Nation's ports of entry when the
shipment arrives. For instance, in fiscal year 2013, CBP cargo
examinations and entry reviews revealed evasion of AD/CVD duties for
aluminum extrusion products from China, which led to the recovery of
over $5 million. Another example is when two port operations on candles
from China identified misclassifications, resulting in the receipt of
almost $1.1 million in antidumping duty. A third case involving local
operations and blitzes conducted by one CBP field office on multiple
AD/CVD commodities recovered a total of over $6 million in AD/CVD
duties. CBP staff at ports of entry are continuously reviewing import
information to detect AD/CVD evasion and noncompliance, deter future
evasion, and bring importers into compliance with AD/CVD requirement.
CBP aggressively utilizes all available authority under the law to
collect AD/CVD. CBP continued in fiscal year 2013 to widely employ its
legal authority concerning AD/CVD imports by requiring additional
security in the form of single transaction bonds (STBs) to protect the
revenue when CBP has reasonable evidence that a risk of revenue loss
exists. These measures have been very effective in protecting the
revenue and facilitating compliance with AD/CVD. Although each import
transaction is judged on its own merits, CBP has provided guidance to
field personnel on the appropriate and consistent use of the port's
authority to enforce against AD/CVD evasion by taking actions such as
requiring ``live'' entry (that is, payment of estimated duties at the
time of entry along with entry summary documentation) or additional
bonding, such as STB, when the port has developed a reasonable AD/CVD
concerns that acceptance of a transaction secured by a continuous bond
alone would place the revenue in jeopardy.
A key component of CBP's strategy to resolve AD/CVD debts involves
the creation of a team within the Office of Administration dedicated to
AD/CVD collections. CBP anticipates that the creation of the AD/CVD
Collections team will enhance CBP's technical expertise to deal with
the unique complexities of the AD/CVD process; enable CBP to identify
importers unwilling or unable to pay outstanding bills earlier; and
provide deeper integration of the full AD/CVD processes to anticipate
AD/CVD debts rather than simply react to those debts after they are
formally established.
Additionally, CBP has developed a 5-year AD/CVD strategic plan to
maximize resources for detection and evasion enforcement through
advanced targeting and analysis, and to streamline our administrative
process.
cbp's trade transformation
CBP recognizes its critical role in the economy and has responded
by embarking on a ``Trade Transformation''--a series of initiatives
that create efficiencies for U.S. businesses, the Government, and the
consumer. In addition to imports, CBP is working to modernize its
export process in support of both the President's National Export
Initiative to streamline the export process and foster growth for U.S.
companies and the Export Control Reform Initiative to bolster
competitiveness of key U.S. manufacturing and technology sectors. Even
as trade volumes continue to rise, these initiatives strengthen CBP's
capabilities and the Nation's economic competitiveness by lowering the
cost of doing business, strengthening enforcement efforts, and leveling
the playing field for U.S. companies.
Through the implementation of CBP's Trade Transformation
initiatives, such as the creation of the CEEs, we are working to
increase the Nation's economic competitiveness by lowering the cost of
doing business, removing barriers to facilitation, and leveling the
playing field for U.S. companies. Additionally, these transformative
efforts help CBP strengthen trade enforcement efforts and address
ongoing challenges such as AD/CVD collection, by improving and
modernizing its trade processes.
CBP's Trade Transformation initiatives not only seek to create
efficiencies within the agency's business processes, but also seek to
develop a consistent ``One U.S. Government'' approach at the border.
CBP, in collaboration with 47 Partner Government Agencies (PGA) that
have equities in the trade process, is working toward standardizing
Government procedures, streamlining processes, driving efficiencies
through automation, and aligning and harmonizing processes with
industry business processes.
The need for consistency and harmonization has been a driving force
behind our automation efforts. Currently, there are hundreds of paper
forms being used to import and export goods. Through the Automated
Commercial Environment (ACE), CBP's cargo processing system, we are
transforming trade transactions to be more efficient, standardized,
simplified, less costly, and more predictable for importers and
exporters. ACE will streamline collection and improve enforcement with
new automation tools. Electronic bond processing, or e-bond, will be
deployed in January next year, and will automate the STB process,
enhance tracking ability, and provide enhanced traceability to
corresponding transactions for ACE Entry Summaries. ACE will fully
replace ACS and improve liquidations, including the ability to indicate
and track liquidation by operation of law. ACE also provides for
improved communication between CBP, PGAs, and the trading community.
ACE's information-sharing capabilities make it easier for importers to
file their information with CBP, and enables CBP to target and assess
risk earlier in the supply chain. As ACE functionality is introduced,
the associated segments of its predecessor, ACS, are being retired. ACE
is being developed and deployed in increments, and is expected to be
fully functional by December 31, 2016. Through ACE and e-bond, manual
processes will be streamlined and automated, paper will be virtually
eliminated, and the international trade community will be able to more
easily and efficiently comply with U.S. laws and regulations.
In February 2014, President Obama issued an Executive Order (E.O.
13659), Streamlining the Export/Import Process for America's
Businesses, which, among other things, directs Federal agencies with a
role in trade to design, develop, and integrate their requirements into
an electronic ``Single Window,'' known as the International Trade Data
System, by December 2016. ACE will ultimately serve as the ``Single
Window'' and enable businesses to electronically transmit the data
required by the U.S. government to import or export cargo, replacing
current practices which are often paper-based and sometimes redundant.
This approach will ensure cargo is more secure, will reduce transaction
costs for both the government and the trade, and will expedite cargo
release. The Executive Order also requires agencies to work together to
enhance supply chain processes so that the United States can compete
more effectively in the world marketplace.
CBP is also working to design a Government-wide `trusted trader'
partnership program that would integrate CBP's Customs-Trade
Partnership Against Terrorism (C-TPAT) and the Importer Self-Assessment
(ISA) with other U.S. government trusted trader programs. On June 16,
2014, CBP, in collaboration with the U.S. Consumer Product Safety
Commission (CPSC) and the U.S. Food and Drug Administration (FDA),
announced the joint effort to begin the testing of the Trusted Trader
program.\2\ This pilot is expected to inform a comprehensive trusted
trader program that standardizes program participation criteria and
assists CBP in addressing supply chain security, trade compliance,
financial compliance, and enforcement. The program would allow CBP to
redirect resources to unknown and high-risk importers, while improving
predictability and transparency.
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\2\ Federal Register Notice, June 16, 2014, Announcement of Trusted
Trade Program Test. https://www.Federalregister.gov/articles/2014/06/
16/2014-13992/announcement-of-trusted-trader-program-test
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conclusion
CBP will continue to apply advanced risk-based targeting to enforce
trade laws and interdict illegal cargo to ensure the implementation of
statutory and regulatory authorities and to minimize loss of revenue.
CBP will continue to prioritize enforcement actions and compliance
initiatives in support of U.S. AD/CVD laws.
CBP works closely with the Department of Commerce, Department of
the Treasury, the U.S. Trade Representative, and all other relevant
agencies to pursue all available avenues to improve the level of duty
collection, ensure importer compliance and prevent loss of revenue. CBP
closely collaborates with ICE/HSI to substantiate and act upon duty
evasion allegations to support enforcement actions, and to coordinate
civil and criminal enforcement of AD/CVD laws. Together, CBP and ICE/
HSI continued to train field staff on AD/CVD enforcement.
CBP is committed to working with other government agencies to
quickly identify and resolve collection problems, while ensuring that
all relevant stakeholders understand these issues and are engaged in
developing solutions to facilitate legitimate trade and protect the
U.S. economy. CBP will continue to work closely with U.S. industry to
obtain the key trade intelligence that is critical to enforcing AD/CVD.
Ongoing enforcement efforts are bolstered by CBP's trade
transformation initiatives, which increase automation, streamline
processes, and facilitate trade for low-risk legitimate shipments.
These combined efforts, reflect CBP's recognition of, and commitment
to, its vital role in support of the U.S. trade agenda.
Chairwoman Landrieu, Ranking Member Coats, and Members of the
Subcommittee, thank you for the opportunity to testify today. I am
happy to answer any questions you may have.
Senator Landrieu. Thank you.
Mr. Kubiak.
STATEMENT OF LEV KUBIAK, ASSISTANT DIRECTOR OF
INTERNATIONAL AFFAIRS, IMMIGRATION AND
CUSTOMS ENFORCEMENT
Mr. Kubiak. Good afternoon, Chairman Landrieu, Ranking
Member Coats. Thank you to the witnesses for the earlier
testimony from them as well.
It is my privilege to testify today about U.S. Immigration
and Customs Enforcement's Trade Investigation Program, which
originates, as you may know, from 1791, when the Treasury
Secretary authorized Customs officials to examine the records
of Customs collectors, and 1879, when special agents were first
employed to detect fraud and revenue crime.
The Homeland Security Act of 2002 divided Customs
authorities between Customs and Border Protection, which is
responsible for enabling legitimate trade and enforcing trade
laws at the border and beyond, and ICE, my agency, which
investigates, disrupts, and dismantles criminal organizations
that circumvent border security.
Over the last several years, we have dedicated more and
more effective effort toward addressing trade and intellectual
property crime by increasing our collaboration primarily with
CBP, by enhancing our cooperation with other U.S. and
international government partners, and with industry.
We are more effectively using the resources that Congress
provided to address illegal trade and trade practices that harm
our economy, the health and safety of the American people, and
American businesses and jobs.
In fiscal year 2013 alone, HSI offices increased trade
investigative hours to more than 637,000 hours. Trade
investigations are now up over 4,400 investigations and arrests
are up to 871 last year alone.
This record-setting number of investigations includes
priority trade areas such as importation of counterfeit
pharmaceuticals, counterfeit military parts, counterfeit
automotive parts, antidumping and countervailing duty
investigations, environmental crimes and wildlife trafficking,
textile and tobacco smuggling, and illegal products made with
forced child labor.
There are currently more than 80 antidumping investigations
related to commodities such as honey, seafood, steel,
mushrooms, and wooden bedroom furniture under way.
Our new trade strategy together is realizing significant
results. To illustrate that, I would direct your attention to
the pamphlet that was handed to you, and the slides that were
handed to you, which talk about the investigation referenced
earlier by our honey witness.
To illustrate the effectiveness of the strategy, I would
like to explain Operation Honeygate. If you turn to the second
page, it shows an investigation that was initiated on the basis
of industry allegations about a U.S. importer, Alfred Wolff,
which is a global company that conspired with an international
group of 14 individuals that included importers and Chinese
manufacturers.
The Wolff company--next slide, please, on the third page--
used different criminal schemes to smuggle honey, as one of
your witnesses testified to, at times transitioning from one
scheme to another.
At first, the company falsified CBP entry documents to
Chinese honey so that it was declared as Russian. Then the
company physically transshipped Chinese honey through eight
different countries and fraudulently took advantage of new
shipper status by falsifying to CBP and the Department of
Commerce the true origin of the Chinese honey.
The Wolff company and corporate conspirators were indicted
in 2010, but the investigation revealed additional corporate
conspiracies. Groeb Farms, one of the world's largest honey
packers, and Honey Holding also knowingly purchased smuggled
honey.
By placing an undercover HSI agent in as the company's
director of procurement, we identified companies that
consolidated illegal honey, foreign and U.S. entities that
facilitated its illegal entry, and multiple shell companies--
again, as your witnesses have stated--created to be importers
of record solely for the purpose of the smuggling scheme.
In total, the investigation identified approximately $280
million in evaded antidumping duties, seized 250,000 gallons of
illegal and sometimes antibiotic-laden honey, indicted 19
people and eight companies, and issued monetary penalties
exceeding $35 million.
More importantly, a handful of agents, officers, and a DOJ
attorney stopped an average of $26 million in annual
antidumping fraud and, according to the domestic honey
industry, saved businesses and jobs in the United States.
Our successes are not just limited there. We have had
significant successes and intellectual property collaboration
with industry and other Federal governments to include
Operation Chain Reaction, which is focused on counterfeit parts
making their way into the United States military.
As a matter of fact, just earlier this year, the CEO of a
company named Powerline in Los Angeles was convicted by a jury
for selling 80,000 counterfeit batteries to the United States
Navy for aircraft carriers and submarines to use as their
backup power supply. That company is no longer selling
counterfeit parts to the United States Government.
ICE is the world's largest customs investigative entity and
recognized as a worldwide expert in criminal Customs matters.
Foreign engagement with international bodies like the World
Customs Organization and our global attache network allow
collaboration with international partners to investigate along
the entire international supply chain, which is critically
important in antidumping.
PREPARED STATEMENT
With CBP, we are leveraging all of our tools to unite
domestic and international law enforcement efforts to combat
trade crime. We are building upon enforcement successes through
enhanced industry intelligence-sharing. We have created new
antidumping training with CBP, DOJ, and ICE HSI agents. We have
collocated CBP and HSI investigative trade teams together in
major ports, including New Orleans, and are sharing
investigative outcomes with other Government agencies and with
the industry so they can close vulnerabilities identified
through that investigative process.
I appreciate the opportunity to share these results with
you. I appreciate your support of ICE's investigative efforts,
and I look forward to your questions.
[The statement follows:]
Prepared Statement of Lev Kubiak
introduction: a strong tradition of customs enforcement
Chairman Landrieu, Ranking Member Coats, and distinguished Members
of the Subcommittee. It is my privilege to testify before you today and
discuss U.S. Immigration and Customs Enforcement's (ICE) approach to
combating trade fraud. The growth of international trade is an integral
part of our nation's economic prosperity, and we must ensure we are
attuned to the new threats to public safety and national security it
may pose.
ICE is the largest investigative component in the Department of
Homeland Security (DHS), with an extensive portfolio of enforcement
authorities. Notably, ICE's Homeland Security Investigation's (HSI)
Special Agents possess statutory authority to enforce more than 400
Federal laws. Specifically, ICE investigates a wide range of trade
fraud, including intellectual property (IP) violations. IP violations
and trade fraud pose significant threats to the U.S. economy and the
health and safety of the American public.
ICE has a proud legacy of trade fraud enforcement dating to our
past as investigators for the former U.S. Customs Service. In 1791, the
Secretary of the Treasury authorized employment of special agents to
examine the accounts and books of the Collectors of Customs, and in
1879, special agents were employed to detect and prevent fraud of
customs revenue. Since those early years, customs employees have worked
together to identify and investigate criminals who cheat the U.S.
Government by taking its lawful revenue and to protect U.S. citizens
and U.S. businesses from illegal imports and unfair competition. With
the creation of the DHS by the Homeland Security Act of 2002, customs
was split into two agencies, ICE and U.S. Customs and Border Protection
(CBP). CBP is now responsible for enabling legitimate trade and
enforcing trade laws at the U.S. border and ports of entry. ICE, as
DHS's investigative arm, investigates U.S. importers, companies or
other entities that attempt to circumvent lawful trade mechanisms,
including payment of required duties. Both agencies continue to work
closely together to address new and emerging threats to lawful trade
and the effective enforcement of U.S. customs laws in order to protect
the American public.
To focus government efforts and enhance government efficiency, ICE
leads the National Intellectual Property Rights Coordination Center
(the IPR Center), which combats violations of intellectual property
rights, specifically trademark counterfeiting and copyright piracy, and
other aspects of trade fraud. Now with 21 partners, including other
Federal agencies, Europol, INTERPOL, and the governments of Mexico and
Canada, the IPR Center brings together the full range of legal
authorities and law enforcement tools to combat IP violations.
Through the IPR Center's Commercial Fraud Unit, ICE aggressively
pursues commercial fraud violations, including dumping and
countervailing duty evasion schemes, pharmaceutical smuggling, tobacco
smuggling, and border related trade crimes. ICE enforces U.S. trade
laws and international agreements, as well as investigates and
aggressively seeks prosecution of noncompliant importers, exporters,
manufacturers, brokers, and others who commit trade-related crimes. ICE
works in full collaboration with CBP in these efforts, and engages the
trade community through an active outreach program.
the ipr center
U.S. law enforcement agencies have overlapping areas of
responsibility and limited resources for enforcing intellectual
property laws. Recognizing that collective leverage of resources and
expertise is essential to success, the IPR Center was designed to share
information and promote a coordinated U.S. government response to IPR
enforcement. Since fiscal year 2011, the IPR Center's budget has grown
from $4.3 million to $10.4 million.
The IPR Center includes embedded representation from the following
agencies: ICE, CBP; Federal Bureau of Investigation; Food and Drug
Administration Office of Criminal Investigations (FDA-OCI); U.S.
Department of Commerce's Office of Intellectual Property Rights; U.S.
Patent and Trademark Office; Consumer Product Safety Commission (CPSC);
U.S. Department of State's Office of International Intellectual
Property Enforcement; U.S. Postal Inspection Service (USPIS); Defense
Criminal Investigative Service; Air Force Office of Special
Investigations; U.S. Naval Criminal Investigative Service; General
Service Administration's Office of the Inspector General; U.S. Army
Criminal Investigation Command; Defense Logistics Agency; National
Aeronautics and Space Administration; the Nuclear Regulatory
Commission, Mexican Revenue Service; Royal Canadian Mounted Police;
INTERPOL and Europol.
The IPR Center utilizes a multi-layered approach consisting of
investigation, interdiction, prosecution, outreach, training, and
public education to fight IPR crime. To accomplish this, the IPR Center
is organized into three units: the Intellectual Property Unit, the
Commercial Fraud Unit and the Global Outreach and Training Unit.
The Intellectual Property (IP) Unit executes the oversight and
coordination function for multi-jurisdictional, large-scale
intellectual property investigations. This unit proactively targets the
sale and distribution of counterfeit, substandard, and tainted products
via the Internet and works closely with partner agencies at the IPR
Center and both the Department of Justice's (DOJ) Computer Crimes and
Intellectual Property Section and the U.S. Attorney's Offices
nationwide to prosecute IPR violators domestically and internationally.
The IP unit is responsible for collaborating IPR Center's initiatives
with our interagency and international partners.
One of the roles of the IP Unit is to analyze and disseminate new
leads of alleged IPR criminal violations. In fiscal year 2013, the IPR
Center received 8,539 such leads. Of these leads, 2,778 were sent to
ICE HSI field offices and IPR Center partner agencies, 37 were sent to
non-partner agencies (including state and local police or sheriffs),
and 73 leads were referred to industry. The remaining leads were
catalogued but either did not contain enough information or did not
rise to the level where referral to law enforcement was necessary. If
additional information is found that can be combined with the
catalogued leads, they will be re-evaluated and referred to the
appropriate entity.
The IP Unit also de-conflicts leads received by the IPR Center from
its partner agencies, industry, and the public prior to forwarding
actionable information to the field or to industry. Investigative case
referrals, whether made nationally or locally to particular law
enforcement agencies or to the IPR Center, are compared and checked
with all partners to determine whether an agency is already
investigating the alleged IP violation, which effectively avoids a
duplication of effort. When a conflict is identified early in the
investigative process, agencies are encouraged to collaborate or
consolidate investigative activity. Often large, complex investigations
and operations are conducted jointly by partner agencies. IPR Center
partner agencies also share information from their investigations that
will aid future investigations, such as emerging criminal trends and
new infringing technologies. In fiscal year 2013, the IPR Center de-
conflicted 111 cases between partner law enforcement agencies, non-
partner law enforcement agencies, and private industry.
The Commercial Fraud Unit coordinates investigations focused on
illegal imports and exports involving violations of civil and criminal
customs laws, including: antidumping and countervailing duty evasion,
the diversion of merchandise transiting the United States in-bond,
illegal textiles, products violating environmental laws, imported items
made with forced labor, and fraud associated with U.S. Free Trade
Agreements and preferential trade legislation. HSI's Commercial Fraud
Unit coordinates the targeting and investigation of criminals who make
false statements on customs documents and have deceptive business
practices. ICE and CBP target predatory and unfair trade practices that
threaten our economic stability restrict the competitiveness of U.S.
industry in world markets, and place at risk the health and safety of
the American people. In fiscal year 2013, ICE opened 796 new
investigations, made 178 criminal arrests, had 180 indictments coupled
with 103 criminal convictions.
The Global Outreach and Training Unit use outreach and training to
increase information sharing between the U.S. Government and the public
and private sectors. The resulting partnerships are used to educate and
to facilitate the exchange of information on current trends, patterns,
and methodologies used by criminal organizations. This unit also plays
a key role in the IPR Center's efforts to reduce thedemand for
counterfeit goods and pirated content by teaching the public about the
dangers of counterfeit goods, how to identify fake and illegal content,
and what to do when they discover it. The Global Outreach and Trade
Unit is the initial point of contact for all potential sources of
information, including the private sector, Federal, state, local, and
foreign law enforcement, as well as the public. The IPR Center
coordinates with its partner agencies and appropriate international
organizations to conduct training and provide support for anti-
counterfeiting efforts with international customs administrations and
law enforcement agencies.
The central goal of the IPR Center is to provide a ``one stop
shop'' for law enforcement and industry around the United States and
the world related to trade crimes and particularly IP crime. Our
outreach is designed to increase support, communication, coordination,
and cooperation for our ongoing IPR enforcement initiatives and our
critical public health and safety efforts.
Since July 2008, the IPR Center has coordinated and conducted 1,794
outreach and training events with approximately 38,000 industry
representatives, and 12,400 foreign government officials. This outreach
and training has received substantial positive feedback.
In May 2014, with Department of State funding, the IPR Center and
HSI Buenos Aires sponsored IP training focused on the health and safety
issues related to IP crime and the need for cooperation between
agencies, such as customs and police, and between countries, as well.
This training included segments on international trade fraud and
counterfeit pharmaceutical investigations, with presentations from
Pfizer Global Security and Astra Zeneca Global Sales. Case examples
were also provided, including a presentation from the IPR Center's
Mexican SAT (Servicio de Administracion Tributaria) representative
highlighting the importance of international cooperation and case
coordination between neighboring countries to effective IP enforcement.
As a result of the training program, Chilean Customs and PDI (Policia
de Investigaciones) launched enforcement operations that same week.
Both operations resulted in seizures of counterfeit merchandise,
including 26,000 pieces of counterfeit makeup kits containing cancer-
causing ingredients.
protecting the u.s. economy
Illicit cargo and goods are often smuggled into the U.S. through
methods similar to those utilized by drug traffickers and human
smugglers. Individuals illegally import items by sea, air and land,
penetrating U.S. borders with falsely described and/or mislabeled
merchandise. Schemes include the exploitation of the in-bond system,
transshipping to third countries and falsifying the country of origin,
or stealing the identity of a legitimate importer. Criminals may also
try to illegally import goods made with forced labor, forced child
labor, or prison labor in violation of 19 U.S.C. 1307. Each of these
crimes may economically benefit the criminals, but also has a
significant impact on American industries that compete with these
illegal imports, the U.S. Government which is denied lawful revenue,
and the public which may be harmed by substandard goods. ICE works in
close cooperation with CBP, other interagency partners, the private
sector, and international counterparts to investigate these schemes and
to seize for forfeiture those goods entering the United States
illegally through our ports.
One example of our interagency cooperation is the National
Targeting Center-Investigations (NTC-I). ICE established the NTC-I in
December 2013, in collaboration with CBP, to further the shared border
security mission. The NTC-I serves as ICE's central targeting and
coordination center and plays a critical role in promoting border
security, public safety, and national security through the
identification and investigation of transnational criminal
organizations and their attempts to undermine DHS's border security
efforts, including trade fraud and intellectual property violations.
The cornerstone of the NTC-I is to enhance and support ongoing ICE
investigations, provide quality investigative referrals and
intelligence to HSI field offices, and expand current collaboration
with CBP.
Anti-Dumping and Countervailing Duties
ICE's Antidumping and Countervailing Duty (AD/CVD) program
illustrates how ICE and CBP protect U.S. businesses from unfair trade
practices and protect the revenue of the United States. Dumping occurs
when importers sell merchandise at less than fair market value, which
causes material injury to a domestic industry producing a comparable
product. When the U.S. Department of Commerce (Commerce) determines
that an imported product is being dumped or benefits from an actionable
subsidy and the International Trade Commission finds injury or threat
of injury to a U.S. industry, ananti-dumping duty order or
countervailing duty order is imposed to offset the dumping or
actionable subsidization.
With assistance from CBP and Commerce, HSI agents investigate
importers or other entities attempting to circumvent payment of customs
duties. Our special agents work closely with CBP officers, import
specialists, and regulatory auditors to identify the criminal
enterprise that is engaged in the illegal trade practice that is
harming legitimate U.S. industry, to recover the legally required
tariff revenue owed to the United States, and impose civil and criminal
penalties commensurate with the crime and to deter other bad actors.
AD/CVD cases are long-term, transnational investigations that require
significant coordination between domestic and international offices and
with our foreign law enforcement counterparts.
In one recent case called Operation Honeygate, ICE exposed a
criminal network responsible for evading $181 million in antidumping
duties on imported Chinese honey. Several individuals were convicted
for their criminal activities and two of the nation's largest honey
suppliers paid millions of dollars in fines.
HSI San Juan, working jointly with CBP officers, arrested five
individuals and indicted three companies who allegedly participated in
a conspiracy to illegally import aluminum extrusions from China
transshipped through Malaysia to avoid over $25 million in AD/CVD
duties. Four accounts containing approximately $686,000 have been
seized and 12 properties have been entered into civil forfeiture
proceedings.
Currently, HSI is involved in more than 80 investigations relating
to open Commerce AD/CVD orders covering commodities such as honey,
saccharin, citric acid, tow-behind lawn groomers, shrimp, steel, and
wooden bedroom furniture.
In-Bond Diversion and Trade Schemes
ICE and CBP have identified illegal diversion of in-bond
merchandise as a vulnerability that can endanger public health and
safety, damage the U.S. economy, and facilitate or finance the illegal
activities of organized crime. The in-bond system allows foreign
merchandise to physically enter the United States at a port of entry to
transit the United States for export to a third country. When conducted
properly, in-bond transactions facilitate trade by allowing the use of
U.S. infrastructure for the transportation of goods to foreign markets.
In-bond movements are incredibly valuable to trade, but also have an
inherent vulnerability because they can be diverted to smuggle
restricted or high-duty items into the United States.
In July 2013, a San Diego Customs broker was sentenced to 37 months
in prison for a multi-million dollar in-bond diversion criminal fraud
scheme. The customs broker, along with three international trade
companies and seven other individual co-conspirators, were charged in a
56-count criminal complaint for orchestrating a lucrative customs fraud
scheme that involved more than 90 international commercial shipments
valued at more than $100 million and resulted in more than $10 million
in lost customs duties and taxes. Products illegally imported under the
scheme included adulterated Mexican food products, as well as produce
infected with the life-threatening salmonella bacteria.
Textile Investigations
Textile imports represent approximately 41 percent of all duties
collected by CBP in fiscal year 2013, resulting in $12.9 billion in
revenue for the U.S. Government. Textile investigations focus on
obtaining criminal and civil remedies for violations of customs
importation laws and smuggling schemes such as the undervaluation of
textiles entered into the United States for consumption, diversion
through the in-bond transportation system, transshipment, and
fraudulent free trade agreement claims. The textile program coordinates
investigations of criminal and civil violations of customs laws carried
out through a variety of fraudulent schemes and practices, including
false invoicing, false claims of origin, false marking and labeling,
misclassification, mis-description, and smuggling.
Textile cases often reveal significant revenue losses for the U.S.
Government. On April 9, 2014, HSI New York special agents reported a
$10 million settlement was approved pursuant to a civil customs fraud
investigation against two importers of women's apparel; the penalty was
paid under the authority of 31 U.S.C. Sec. 3729, the False Claims Act.
Both importers were charged with cheating the United States out of
millions of dollars in customs duties over a decade through the use of
false invoices. The defendants paid their overseas manufacturers the
full value of the apparel, but deducted a flat fee per garment set
before calculating the duty on the apparel. The defendants then
recorded only the lower value on the entry forms presented to the
government. Through this fraud scheme, the defendants avoided paying
millions of dollars in customs duties.
Environmental Crimes
ICE's Environmental Crimes Program encompasses a myriad of
investigative areas including, the illegal importation of protected,
endangered and non-native detrimental species, unapproved or non-
compliant automobiles, machinery and other equipment, and
environmentally hazardous materials and chemicals.
One example of ICE's work to protect the environment involves an
endangered large marine fish called Totoaba, the bladders of which have
been traditionally used in a Chinese soup. Fishing for Totoaba has been
banned since 1975 and there has been a prohibition on importing them
into the United States, except for purposes of scientific research
since 1976. In conjunction with the Fish and Wildlife Service and CBP,
ICE began investigating a wildlife smuggling organization in February
2013, that smuggled Totoaba bladders from Mexico into the United
States, with an intended final destination of Hong Kong. As part of the
investigation CBP seized four kilograms of Totoaba swim bladders at a
DHL facility in Phoenix. The Totoaba bladders were mis-manifested as
dry meats originating from Mexico destined to Hong Kong. HSI Hong Kong
then worked with Hong Kong Customs to facilitate a successful
international controlled delivery, producing two arrests and
intelligence on the source in Mexico. To date, the investigation has
resulted in seven criminal arrests, five indictments, five convictions,
seizure of 455 Totoaba swim bladders, forfeiture of $181,518, and the
payment of $500,000 in restitution to the Government of Mexico.
protecting national security and health and safety
Operation Chain Reaction
Operation Chain Reaction (OCR) is an IPR Center initiative that
combines the effort of 16 Federal law enforcement agencies to target
counterfeit items entering the supply chains of the Department of
Defense and other U.S. Government agencies. By partnering together, the
participants in OCR are coordinating their efforts to more productively
protect the U.S. Government supply chain.
In a case investigated by ICE, DCIS, and NCIS, a Massachusetts man
pleaded guilty in June 2014 to importing thousands of counterfeit
integrated circuits (ICs) from China and Hong Kong and then reselling
them to U.S. customers, including contractors supplying them to the
U.S. Navy for use in nuclear submarines. The subject told his
customers, many of whom specified in their orders that they would not
accept anything but new ICs which were not from China, that the ICs
were brand new and manufactured in Europe. Testing by the Navy and one
of their contractors revealed the ICs had been resurfaced to change the
date code and to affix counterfeit marks, all in order to hide their
true pedigree. In order to purchase these ICs, the subject wired nearly
$2 million to his suppliers' bank accounts in China and Hong Kong, in
violation of Federal money laundering laws. This was the second
conviction ever under trafficking in counterfeit military goods, a
provision in the U.S. criminal code which was enacted as part of the
National Defense Authorization Act of 2011.
In another case, the former Chief Executive Officer (CEO) of
Powerline, Inc., a battery distributor, was found guilty of five counts
of wire fraud and one count of conspiracy to defraud the United States
by selling more than $2.6 million in cheap, counterfeit batteries to
the U.S. Department of Defense. In joint case by ICE and DCIS, with
assistance from DLA and the Defense Contract Audit Agency,
investigators discovered that Powerline sold more than 80,000 batteries
and battery assemblies that the U.S. Navy used for emergency back-up
power on aircraft carriers, minesweepers and ballistic submarines. The
company would affix counterfeit labels falsely identifying the
batteries as originating from approved manufacturers and used chemicals
to remove ``Made in China'' markings from the batteries. The CEO fled
the United States, but was apprehended when undercover HSI special
agents hired him to sail his yacht to the U.S. Virgin Islands after
spending more than 2 years on the yacht near St. Martin. Once the CEO
entered U.S. Territory, he was arrested and his yacht was seized.
OCR has resulted in 40 criminal arrests, 70 indictments, 42
convictions, and 1,078 seizures worth $21.2 million (MSRP) in
counterfeit parts, currency, and vehicles. Counterfeit items seized
through OCR include commercial-grade devices re-marked as military-
grade and counterfeit semiconductors intended for use on nuclear
submarines.
Operation Engine Newity
Operation Engine Newity targets the importation and distribution of
counterfeit and substandard automotive products that impact the health
and safety. Investigations and interdictions by ICE, the FBI and CBP
have uncovered counterfeit airbags, steering, braking and seat belt
components.
In October 2012, as a result of investigations by ICE and seizures
by CBP, the U.S. Department of Transportation issued a consumer safety
advisory to vehicle owners and repair professionals about counterfeit
airbags; after safety tests showed a 100 percent failure rate. ICE and
CBP have seized $11.3 million MSRP worth of counterfeit auto products
since fiscal year 2010, and made 27 arrests, 17 indictments, and three
convictions.
Operation Guardian and Operation Apothocary
Operation Guardian (Guardian) is the IPR Center's public health and
safety initiative. Guardian was initiated in October 2007 in response
to several incidents in which hazardous imports into the United States
caused serious public safety concerns.
In developing Guardian, ICE solicited the assistance of numerous
law enforcement and regulatory agencies, including CBP, FDA OCI, the
FDA's Division of Import Operations, USPIS, DOJ CCIPS, CPSC, and the
U.S. Department of Agriculture (USDA). These agencies formed a
Headquarters Working Group (WG) to target high-risk commodities from
foreign sources.
HSI alone has initiated 1,030 Guardian investigations resulting in
491 criminal arrests, obtained 496 indictments, secured 359
convictions, and worked with CBP to make more than 6,400 seizures
valued at over $218 million (MSRP).
Operation Apothecary (Apothecary), which falls under the auspices
of Guardian, works to combat the growing use of the Internet in illegal
drug distribution. Criminals, posing as legitimate pharmaceutical
providers, use the Internet to advertise purportedly FDA-approved
prescription drugs, and/or less expensive unapproved foreign
alternatives, all without requiring a valid prescription. The consumer
purchases the pharmaceutical with the belief that the product
advertised is a legitimate product, but in fact, is a counterfeit or
unapproved version of the drug manufactured under unknown conditions or
not subjected to any safeguards or quality control regimes. Apothecary
addresses, measures, and attacks potential vulnerabilities in the entry
process to attack the smuggling of commercial quantities of
counterfeit, unapproved, and/or adulterated drugs through the Internet,
international mail facilities, express courier hubs, and land borders.
In support of the Apothecary mission, IPR Center personnel
coordinated and conducted periodic enforcement surges in conjunction
with ICE, CBP, FDA and USPIS at international mail facilities and
express courier hubs throughout the United States. As part of
Apothecary, HSI has arrested 212 individuals and obtained 235
indictments resulting in 201 convictions. There also have been 3,068
seizures worth approximately $22.5 million (MSRP).
international efforts
ICE HSI International Operations is DHS's largest investigative law
enforcement presence overseas and fulfills a critical role in the
safety and security of the United States. ICE deploys more than 240 HSI
special agents and 156 foreign service nationals to 67 attache offices
in 48 countries, as well as 8 liaisons to the Department of Defense.
Their mission is executed through the enforcement of more than 400
Federal statutes that protect the United States from illicit goods,
people, and money byconducting multi-faceted, international law
enforcement operations and removals, and by disrupting transnational
criminal and terrorist organizations before their illicit activities
reach our nation's borders.
Cooperation with our international law enforcement partners is
critical in combatting copyright and trademark infringement overseas
and effectively protecting and enforcing American intellectual property
rights holders. U.S. Government Attaches in a number of agencies,
including ICE, the Department of Justice, FDA, and the U.S. Patent and
Trademark Office, work with international organizations and foreign law
enforcement counterparts to build capacity, strengthen relationships,
and conduct joint enforcement activities. ICE, as the world's largest
customs investigative entity, is recognized as a worldwide subject
matter expert on criminal customs matters. HSI has been and continues
to be actively engaged in the WCO through the Enforcement Committee and
other working groups to address global crime problems including
violations such as: intellectual property rights crime, narcotics
trafficking, financial and revenue crimes, cyber-enabled border crime,
environmental crime and wildlife trafficking, proliferation of
controlled commodities, and theft of cultural property.
Trade-Based Money Laundering
Some of the illicit schemes designed to circumvent lawful trade
mechanisms also involve trade-based money laundering (TBML). HSI's
Trade Transparency Unit (TTU)aggressively targets the complex
commercial fraud schemes used by transnational criminal organizations
to move, store, and launder their funds through international trade.
The core component of the TTU initiative is the exchange of trade
data with foreign counterparts, which is facilitated by existing
Customs Mutual Assistance Agreements or other similar information-
sharing agreements. ICE has partnerships with Argentina, Australia,
Brazil, Colombia, Dominican Republic Ecuador, Guatemala, Mexico,
Panama, Paraguay, and the Philippines. These partner countries
recognize the value of sharing trade data with the United States and
gaining the tools to analyze their own data. By combining international
efforts, the TTU can identify international trade anomalies indicative
of trade-based money laundering. This information is then used to
initiate and support international criminal investigations related to
customs fraud, tax evasion, money laundering and other financial
crimes. It bears mention that, ICE is the only Federal law enforcement
agency capable of exchanging trade data with foreign governments to
investigate these types of crimes.
Additionally, the TTU is contributing to the successes of ICE
investigations. With the assistance of the Headquarters TTU, the HSI
office of the Special Agent in Charge (SAC) Los Angeles, California in
July 2010 closed a two-year investigation of a Los Angeles based toy
company suspected of money laundering, cash transaction structuring,
and bulk cash smuggling. Headquarters TTU personnel provided analytical
support and assisted the SAC office with the execution of a search
warrant issued on the company. The case culminated in the arrest of the
company's Chief Executive Officer, company owner, and accountant.
Additionally, a Colombian businessman involved in the aforementioned
criminal activities with the company was also arrested.
conclusion
IPR theft and unlawful importation of illicit goods pose a
significant threat to national security, public safety and the economic
security of the United States. ICE investigations have shown that these
illegal traders and criminal organizations are profit-driven, and
exploit loopholes and vulnerabilities in the in-bond system and
financial sectors to advance their criminal enterprises. ICE has unique
expertise, as well as the necessary infrastructure and established key
law enforcement partnerships, to effectively support investigative and
operational activities focused on dismantling criminal organizations--
thus reducing public safety hazards and limiting negative economic
impact to this country.
ICE will continue to leverage all its tools to coordinate and unite
domestic and international law enforcement efforts to combat
international trade crimes. We are also dedicated to building on agency
outreach and training programs with the trade community to enhance
cooperation with all private sector partners.
ANTIDUMPING AND COUNTERVAILING DUTY ENFORCEMENT ACTIONS: REPORT
Senator Landrieu. Thank you very much for that excellent
testimony.
What I am thinking about as I am listening to you is just
as American cities can't function, or communities, for that
matter, without well-resourced police departments to maintain
safety and provide order and security for citizens, ICE has a
huge job in trying to enforce international trade laws that are
absolutely critical for American businesses to be able to
compete globally.
And while I am and Senator Coats are generally free
traders, we would call ourselves, but fair traders, and lean
toward opening up markets and encouraging trade between
countries, I mean, it is clear to me that if this is not done
in the correct way, it can be extremely harmful to American
producers and American business and American suppliers.
So my first question, I just want to get a handle, I do
have the report that was referred to earlier, that our
subcommittee requested. We received the 2012 report,
Antidumping and Countervailing Duty Enforcement Actions, which
this subcommittee required.
However, when we received this report, it wasn't as
detailed as we wanted it to be, and the next report is due. So
my first question is, where is the next report? When can we
expect it? And do you have any information about that?
[The information follows:]
The ADCVD New Shipper Review is in the final stages of clearance
and will be submitted to the Committee shortly. The ADCVD Outstanding
Collections report and the ADCVD Enforcement Actions and Compliance
Initiatives of fiscal year 2014 are currently in interagency review.
These reports should be forthcoming.
Mr. DiNucci. Thank you, Chairman. The report right now is
working its way. Obviously, it has to go through the review
process within DHS. It is cleared from CBP, it is my
understanding at this point, so it should be forth coming.
In terms of the data, I know that we have been working on
those data to address the issues that had in fact been raised
and the data should be included in the report. But I will get
you an update and get back to you.
ANTIDUMPING AND COUNTERVAILING DUTY ENFORCEMENT ACTIONS: MONEY OWED
Senator Landrieu. All right, because that data, I agree 100
percent with the panelists who said we can't really begin to
solve a problem until we can identify exactly what it is. Based
on the short testimony today, we know that China is the most
egregious player, it seems like, from the data that I have
looked at. That is one interesting fact that I think we can put
down as clear.
But other things, and if you could help me here, how much
money, do either of you know, is owed to the American taxpayer,
to the Treasury, to be distributed to those parties injured?
And how much is yet to be collected? Do you all at least have
that data? Because I think it indicates about $1.7 billion. The
staff gave me that chart.
Mr. DiNucci. Chairman, I believe, actually, the number is
probably a little higher than that. I believe it is a little
over $2 billion, $2.3 billion.
There are a lot of various activities associated with that.
I think about 48 or 49 percent of that had actually been
protested at one point in time.
Senator Landrieu. So it is $2.3 billion, approximately.
That is a cumulative number that is suggested that is owed.
Mr. DiNucci. Over a period of about 23 years.
Senator Landrieu. Over a period of about 23 years.
What I am very interested in is breaking down that number
into the appropriate categories. So I think there are
categories, like some of these charges were brought for
companies that just dissolved and went away. Some of these
charges have been brought because of criminal activity.
Can you break down the categories for us about this $2.3
billion, just roughly, so Senator Coats and I can get a better
understanding of that?
[The information follows:]
Of this $2.3 billion (40,130 bills), 27 percent of these bills are
associated with importer records that have a current status of inactive
or voided. Additionally, 86 percent of these bills are associated with
importer records that have shown no activity over the past 2 years.
CBP has 16,574 open AD/CVD claims that have been protested,
totaling nearly $1.1 billion. This represents nearly 50 percent of the
overall uncollected AD/CVD debt. The total number of open AD/CVD claims
that were protested and subsequently denied in full, withdrawn, or the
protest was determined to be untimely filed is 13,957. In summary,
nearly 50 percent of the open AD/CVD claims were protested and of that
protested population, 84 percent have been denied in full, withdrawn,
or the protest was determined to be untimely filed.
------------------------------------------------------------------------
Number of AD/CVD Claims and Protests
------------------------------------------------------------------------
Total Number of Open AD/CVD Claims........ 40,130
Total Amount Due of Open AD/CVD Claims.... $2,293,217,690.59
Total Number of Open AD/CVD Claims-- 16,574 (41%)
Protested................................
Total Amount Due of Open AD/CVD $1,097,028,337.89 (48%)
Claims--Protested....................
------------------------------------------------------------------------
The universe for this data is all open AD/CVD bills as of April,
2014. The data below is organized by fiscal year.
------------------------------------------------------------------------
Number
Fiscal Year Bills Number
Protested Protests
------------------------------------------------------------------------
`92........................................... 24 8
`93........................................... 2 1
`94........................................... 16 4
`95........................................... 31 6
`96........................................... 17 9
`97........................................... 1 1
`98........................................... 23 3
`98........................................... 17 4
`00........................................... 3 1
`01........................................... 33 6
`02........................................... 17 6
`03........................................... 179 45
`04........................................... 530 45
`05........................................... 858 54
`06........................................... 485 56
`07........................................... 1479 125
`08........................................... 1817 186
`09........................................... 2147 192
`10........................................... 5242 296
`11........................................... 3808 138
`12........................................... 734 107
`13........................................... 783 109
`14........................................... 328 142
Totals.................................... 18574 1544
------------------------------------------------------------------------
Of the $2.3 billion, only $63.6 million involves bankrupt debtors.
CBP is unable to quantify the amount of debt associated with criminal
activity.
Below are the bankruptcy totals by fiscal year. The universe for
this data is all open AD/CVD bills as of April, 2014.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Number of Bills Total Owed Number of Importers
--------------------------------------------------------------------------------------------------------------------------------------------------------
`91........................................................... 30 $ 468,346.98 2
`94........................................................... 3 $213.57 1
`00........................................................... 1 $429.75 1
`01........................................................... 99 $106,685.11 2
`02........................................................... 17 $7,657,114.88 4
`03........................................................... 90 $6,017,620.11 3
`04........................................................... 1 $ 3,378.35 1
`05........................................................... 5 $ 22,481.79 1
`06........................................................... 445 $ 9,925,581.89 2
`08........................................................... 42 $28,102,602.03 5
`09........................................................... 6 $1,477,084.21 1
`10........................................................... 151 $1,441,629.20 ............................
`11........................................................... ............................ $1,282,693.72 2
`12........................................................... 77 $2,081,032.58 4
`13........................................................... 175 $1,309,076.45 3
`14........................................................... 60 $3,740,556.33 1
Totals.................................................... 1245 $63,636,526.95 37
--------------------------------------------------------------------------------------------------------------------------------------------------------
CBP cannot quantify this as it does not have an official, formal
designation for disappeared/dissolved companies. There is no way to
segregate this from other uncollected AD/CVD debts.
There are three sureties in receivership or liquidation, under
state supervision. There is one surety that is in runoff, which means
it is insolvent but still operating independent of state supervision.
From the fiscal year 14 AD/CVD Collections Report data, CBP shows that
5,670 open AD/CVD bills involve one of these four sureties, with a
total bill amount of more than $525 million. NOTE: this does not mean
there is $525 million in bonds securing those bills.
Below are open ADCVD bills sorted by the calendar year the bill was
created:
----------------------------------------------------------------------------------------------------------------
Number of
Cal. Yr Bills Total Debt
----------------------------------------------------------------------------------------------------------------
`91............................................................... 2 $12,494.24
`93............................................................... 24 $ 360,178.96
`94............................................................... 61 $39,186,055.87
`95............................................................... 22 $199,276.87
`97............................................................... 1 $82,904.65
`98............................................................... 20 $13,265,798.11
`99............................................................... 24 $1,622,161.49
`00............................................................... 25 $157,137.66
`01............................................................... 40 $1,798,754.28
`02............................................................... 175 $35,791,761.68
`03............................................................... 585 $109,467,390.80
`04............................................................... 566 $184,666,048.48
`05............................................................... 763 $64,537,944.07
`06............................................................... 1249 $101,007,398.22
`07............................................................... 1951 $191,055,129.99
`08............................................................... 3148 $122,280,309.02
`09............................................................... 7424 $279,509,758.73
`10............................................................... 9879 $478,894,345.33
`11............................................................... 4452 $266,924,511.10
`12............................................................... 3970 $144,838,878.79
`13............................................................... 5747 $257,456,015.61
`14............................................................... 2 $103,436.64
Totals........................................................ 40130 $2,293,217,690.59
----------------------------------------------------------------------------------------------------------------
Mr. DiNucci. I would have to go back in terms of
specifically where it came from, when you describe whether it
is illegal activity or whatnot. Most of the $2.3 billion is
actually just straight duty that is owed on the dumping.
Since 1991, that number, at this point, is actually $2.29
billion. There are about 1,500 protests of that, which, when
those protests are broken out, the protests of individual
bills, that is about 19,000 of those bills that are protested.
That worked out to a little over $1 billion.
There are bankruptcies involved, as I think was noted as
well, and there are about 37 of those, a total of about $63
million.
Senator Landrieu. Okay, so let's just be clear on those
numbers. $2.3 billion is the total. Of that, how much is under
protest?
Mr. DiNucci. About 48 percent, or a little over $1 billion,
was protested. We did deny 84 percent of those protests. And
then, obviously, the action is to work in most cases with a
surety or to see if there are assets that could be attached
from the importer.
Senator Landrieu. So we can conclude for sure based on your
20 years of data that you are giving us that most of those
protests will not be upheld.
Mr. DiNucci. Yes.
Senator Landrieu. You denied 84 percent. That is a pretty
significant number.
Mr. DiNucci. Yes, ma'am.
Senator Landrieu. So we could argue that a good 84 percent
of that $1 billion is today still owed and just not collected.
That is a lot of money.
Mr. DiNucci. Yes, ma'am.
ANTIDUMPING AND COUNTERVAILING DUTY ENFORCEMENT ACTIONS: BOND SYSTEMS
Senator Landrieu. So what are we doing to collect that
money? And when could we see any of it?
[The information follows:]
CBP has initiated a labor-intensive survey of unpaid AD/CVD bills
targeting unexhausted surety bond coverage with an expiring statute of
limitations. Separately, CBP has received helpful information from
concerned members of U.S. industries and from colleagues at the
Department of Commerce (Commerce). CBP is using this information to
focus collection efforts and ensure that AD/CVD claims with bond
coverage are paid or referred to the Department of Justice (Justice)
for litigation before the statute of limitations expires.
For example, after a manual review of Commerce's Federal Register
notices concerning antidumping duty order reviews, CBP recently
identified a group of entries of freshwater crawfish tail meat from
China that liquidated by operation of law nearly 6 years ago. The
statute of limitations was due to expire soon on these entries. CBP
took action to preserve the ability to collect more than $14 million by
immediately demanding payment from the importer and surety then
referring the matter to Justice to file suit. Because of CBP and
Justice's efforts to position the U.S. Government to file suit, the
surety paid the full bond amounts securing these debts in early April
2014, on the day before the statute of limitations would have expired.
CBP faces significant legal challenges from the sureties whose
bonds secure the AD/CVD bills. CBP has worked with Justice to file more
than 30 lawsuits against sureties in the U.S. Court of International
Trade (CIT). More than $316 million of the claims have been referred to
Justice for litigation. In addition, CBP is working with Justice to
defend about 300 lawsuits, the majority of which have been brought by a
single surety, seeking refunds of AD/CVD payments already made, an
amount exceeding $85 million. In the 30-plus collection cases initiated
by CBP, CBP is seeking to collect more than $76 million under surety
bonds securing imports of crawfish tail meat, canned mushrooms, garlic,
and honey. These cases are in various litigation phases, from pleading
to appeal. For example, one lead case on unpaid AD/CVD bills is being
briefed before the U.S. Court of Appeals for the Federal Circuit (see
United States v. Am. Home Assurance Co., Court No. 2014-1292, appeal
docketed February 12, 2014).
CBP is also working with Justice to seek the fullest recovery
possible in the state insolvency proceedings of three former customs
sureties. These cases involve approximately $91 million in bonds
securing over $230 million in unpaid duties, much of which is AD/CVD.
These proceedings have continued for more than 10 years, requiring an
extensive commitment of resources by both CBP and Justice.
While CBP is optimistic about the prospects of collecting in the
legal actions described above, not all outstanding AD/CVD debts will be
successfully collected. Of the $2.3 billion in outstanding AD/CVD
debts, $1.2 billion is potentially disbursable under the Continued
Dumping and Subsidy Offset Act program. Of this $2.3 billion (40,130
bills), 27 percent of these bills are associated with importer records
that have a current status of inactive or voided. Additionally, 86
percent of these bills are associated with importer records that have
shown no activity over the past 2 years. When CBP has exhausted all of
its collection efforts on these claims and they remain unpaid, CBP will
write off the claims. Write-off ceases active collection efforts,
however, CBP maintains records of the unpaid claims. If the company at
any point becomes an active business again, CBP will attempt to
collect. Write-offs are never pursued simply because of convenience.
Mr. DiNucci. Obviously, the first step is a surety. We have
had some success recently with some court cases where a surety
challenged us. In the crawfish area, for instance--
Senator Landrieu. How much of this $1 billion is under
surety? Do you know?
[The information follows:]
CBP cannot answer this definitively. A company may have many
entries in CBP's system associated with the same continuous bond,
within the same annual period. For all such entries secured by the same
continuous bond and annual period, CBP may only recover once up to the
limit of liability of the bond and may have already done so.
Mr. DiNucci. I will check that for you. Most of that will
be under surety in terms of----
Senator Landrieu. So most of this is under surety of
American bond companies. Are they all American or are they
international bond companies?
Mr. DiNucci. They are U.S.-based companies. And again, in
most of these instances, there are court actions. They did come
back; a couple of those companies, in the crawfish arena
specifically, took us to court. We won two recent cases. We
have recovered about $20 million. Of that $20 million, I think
about $14.4 million is available for distribution.
What often will happen, obviously, is a surety. Because of
the nature of the system, we will--it is important that the
entry is actually made. The bond is set to cover a specific
amount of that duty. If the rate changes, the bond will not
cover the entire amount of that duty. And then we have a delta
as we start that process.
Senator Landrieu. Okay, well, clearly, there is some more
information that we are going to have to get about this surety
system. Part of this jurisdiction, I am sure, is in Commerce,
which they regulate trade, and we do enforcement here.
Just leaving $1 billion or $2 billion uncollected and delay
after delay after delay, doesn't seem to be the most effective
system. I may be missing something, but I am going to just ask
if ICE just wants to put something in the record, and then I am
going to turn Senator Coats and we will do a second round of
questions really quickly.
Mr. Kubiak. Thank you, Madam Chairman. Just a quick comment
from the criminal aspect related to this as a result of
investigations we have worked. What we often find is that there
is a very, very small amount of that money that is owed, let's
say, that is actually collectible by the United States
Government because, as your witnesses earlier mentioned, this
shell corporation or shell company creation, which are created
in some cases solely to be a venue for which bills can be
submitted for and the bond can be laid against, but that there
is not actually anyone there at the end of the day, as our
investigation----
Senator Landrieu. Let me ask you something on that. If the
bond is covering it, and there is a shell corporation, isn't
that the risk of the bond issuer?
Mr. Kubiak. Ma'am, I am going to defer that question back
to CBP, but the key piece, I think what we are finding with the
investigations is our ability to collect that money at the end
of the day; that money isn't anywhere.
Senator Landrieu. But if they have a bond, the bond itself
should stand as a collection for that. It is the risk of the
bond-giver, if I am thinking about this correctly, that you
should have no problem collecting it. If the bond company goes
away, it is the bond holder, the bond issuer's risk.
But go ahead.
Mr. DiNucci. Yes. Part of it goes back to the way the bond
was executed. A lot of times if the surety is not convinced the
bond was executed properly, they will challenge it in court.
And we wind up in litigation.
Now, bonds get executed in a variety of fashions. One of
the things that we would, certainly, thank you for specifically
is assistance in helping us to automate that process, in terms
of taking the bonds and creating a process whereby we are able
to track them much more closely.
Senator Landrieu. Because if we can't get this bond thing
straight, I am going to suggest that we go back to the cash
payment, which will solve all sorts of problems.
So for whoever is interested in this, we have to have a
better bond system or we can just go back to cash. People can
put up cash, and that way, if they don't do what they need to
do, then we can use their cash and take care of the injury.
But go ahead.
Mr. DiNucci. Well, I won't disagree that that would,
certainly, be an assistance. I think in terms of the use--for
instance, we are now deploying single transaction bonds much
more aggressively to deal with the evasion schemes.
A lot of that goes back to assessing the risk and managing
the risk and being a lot more transparent with the sureties in
terms of why we are requesting a single transaction bond, so
they will know the risk that we believe is present. Therefore,
they may in fact ask for that bond to be collateralized, which
makes that bond a lot more solid, if you will. It gives us the
ability to at least potentially collect more than we would have
otherwise.
But you are still going to have a delta if in fact the
final rate is greater than the assessed rate at the time the
entry was made.
We are also centralizing the bond process so that we are
able to track bonds much better than we have in the past to
ensure and hopefully reduce the risk of litigation, which would
make collection against the bond easier if in fact we need to
go that route.
Part of what we are also trying to do at this point in time
is use tactical audits. We talked a lot about the trade folks
talking about transparency, and we are committed to that. I
think I have met with a number of people in this room
specifically about that, about giving them feedback when they
provide an allegation to us. We are giving them a direct report
on what is taking place, to the extent that we can.
Now, if we turn it over to Mr. Kubiak at HSI for a criminal
investigation, then we have to be circumspect about what we
roll back.
But the audits are also very useful in terms of just
getting the money up front, and they will go in. They will pay
visits to these companies directly that the trade has told us
are in fact evading.
There could be one or two outcomes. Some of these companies
will simply go out of business, because they know what the next
step will be. Some of them in fact will pony up the duty. We
have had success in that regard.
Senator Landrieu. I have one more question, but I want to
turn it over to Senator Coats.
TRADE CASES: EXPEDITING PROCESS
Senator Coats. Well, I can be brief. My question is, what
did you take away from the previous panel? What can we
undertake to sort of expedite the process? Obviously, if it
goes into litigation, it goes into litigation. But if there are
shortcuts here or efficiencies that we can implement based on
what was said here this morning, I think timing, the statement
that Mr. Blume made, finally, when you win a trade case, the
damage is already done. So it is sort of a hollow win.
But did you take anything away from that? Is there anything
we can do in terms of better communication, better expediting
processes, et cetera?
Mr. DiNucci. Well, Senator, thank you for that question. I
think it is a great question.
We can control what we can control in terms of what Customs
does, and that is what we are really focused on. The process is
what it is.
Definitely, in terms of the communication piece, and
transparency, I think you heard a little bit today about the
fact that we are working with the trade as collaboratively as
possible for training purposes.
When in fact we do get the allegations now, we have changed
that process. There is a series of questions. If we get a point
of contact from a trade, we will ask a series of questions, and
I require staff to reach back to the trade and let them know
exactly what happened with that.
One thing we have, certainly, learned in terms of schemes
we have seen with the shell company issues is that internally,
a process that we used to assign import record numbers needs to
be changed. And we are pursuing that now.
We are automating it. We are making it much more robust, if
you will, in the terms of the data we will request from an
importer, if that prospective importer wants to get an importer
of record number assigned to them by Customs. A large part of
that is designed to find these companies that in fact have
evaded in the past.
We have very sophisticated tools we use to track travelers.
We are essentially going to apply the same process to cargo and
those who want to bring that cargo in.
So, in fact, if we are getting tips from the trade, we have
seen these folks in the past use evasive schemes, we will
identify them before they start that a second time.
Some of the shell schemes, they set the company up, and as
you heard, they will go out the business. Then they will
reconstitute themselves and say to Customs, ``Well, I need a
new import of record number.'' That is what this process is
designed to avoid. We are automating it. We will run this
information through our targeting systems and some of our other
systems, and hopefully identify these people before they wind
up getting inside that system.
Another thing we are trying to do to is, obviously, work a
lot with the domestic industry. But we are also taking a look
at, if you will, the end-user, the consumer of the product,
whether it is pipe, whether it is shrimp, whatever that product
may be, to let them know that they are purchasing this product,
as much as we do in the intellectual property arena, and this
is essentially what you are contributing to, because these
companies are evading.
They are damaging domestic industries. And it is a critical
mission set for CVD, protecting these domestic industries. So
we are going to work with those folks as well and let them know
this is the end result of what they are doing. Hopefully, that
will work.
We have had some initial sort of positive response from
some of the folks who are receiving these goods. Hopefully,
that will work as well.
But I think the critical part is the single transaction
bond use, centralizing and automating that process, and then
creating a really robust process for importers to register to
get a number from us. If you will, we call it a passport for
your cargo.
COMMERCIAL OPERATIONS ADVISORY COMMITTEE
Senator Coats. Do you have advisory panels made up of
private sector at annual meetings, quarterly meetings, where
you exchange ideas and try to work in a collaborative way?
Mr. DiNucci. Yes, we do. The Commercial Operations Advisory
Committee (COAC) is the constituted body that actually does
that.
I know we have talked about getting domestic industries at
the table. There is a subcommittee that deals on AD/CVD, and we
are going to get domestic industry to the table and get them
involved in that, so that we can get all the stakeholders to
discuss these issues.
Again, in terms of transparency, as I said, there are a few
folks in the room that we have met with, and I continuously let
the trade know that, certainly, my door is always open. And it
doesn't only have to be their coming to me with good news. They
can come to me with criticism, things we can act on and
improve.
I think you heard, to an extent, that we have begun to make
some improvements. We are not satisfied with that. We need to
do a lot better, and we will do that. But that door is always
open.
COAC is the constituted body, but, certainly, in terms of
the allegation feedback and things like that, that requires an
open door on our part, and that door is wide open. Anytime they
need to talk with us, whatever the issue, we are willing to
listen.
Senator Coats. Very good. Thank you.
Mr. DiNucci. Thank you, sir.
BONDS: EXPEDITING PROCESS
Senator Landrieu. Thank you. I have just a few more
questions. And then we will submit several in writing for the
record.
Several of our previous panel expressed their concern about
the delay in CBP bringing lawsuits. What is causing these
delays? And can you explain or describe the delay? Is it a
year, is it 2 years, is it 3 years? How many lawsuits are
stacked up? How many are in court? How many are pending? How
many are waiting trial? And what is slowing it down? Or what
could make it go faster?
Mr. DiNucci. Well, to answer the last part of your
question, certainly, what would make it go faster is automating
the bond process, ensuring they are executed properly.
Senator Landrieu. Okay, what do you need to automate the
bond process? Do you need resources? Do you need people? Do you
need technology?
[The information follows:]
CBP is currently in the process of automating the entire bond
process. The automation effort is already funded. CBP plans to deploy
this automation on January 3, 2015 for entries that are filed in the
Automated Commercial Environment (ACE). Overall, the centralization and
automation will not increase personnel needs agency-wide, however, some
reallocation of staffing will be necessary.
Mr. DiNucci. Senator, you were very gracious in funding
what we have done in terms of automating that process. We have
already started to do that. We will have a pilot ready in a few
months. And then that process will be automated early next
year.
So that is underway. Again, thanks to the subcommittee, and
you, specifically, Senator, for assistance with that.
There may be resource implications in terms of personnel to
staff that properly, but that process is well underway. So I
think that begins to deal with that issue in terms of potential
litigation.
There are due process issues, and I will preface this, I am
not an attorney. But in terms of sureties' rights, they have
protest rights. That takes time. That gets into that legal
process that can take a while.
Once that process is finished, whether it is a year or 2
years, I will have to get back to you with the specifics on
that. Then we go to the surety with a formal demand. And then
there is a process that is associated with that as well.
Senator Landrieu. Okay, if there is any way that you all
would recommend, without trampling on people's constitutional
rights, to shorten that process, this subcommittee would be
very interested in hearing it.
And my second question is, are there special courts that
hear this? This goes through special trade courts, not regular
courts?
HONEYGATE
Mr. DiNucci. Court of International Trade, but I will have
to sort of defer to the experts on that. I would assume at some
point, the Federal circuit courts would get involved as well,
depending upon the issue involved.
Senator Landrieu. Because I am going to ask staff to do a
caseload review of where these cases are pending, what is the
number of cases before each judge, sort of an analysis of that
to make sure we can identify where the chokepoints are here.
Let me ask you, Mr. Kubiak, this Honeygate, which is very
interesting, and I understand it was operated out of the
Chicago office, and the names of the agents who were really
successful, I want to put into the record, and I will submit
them. They are Special Agent Mary Buduris, Special Agent
Michael Morre, Special Agent Matthew Gauder were the lead folks
who cracked this case. We want to thank them.
But there is a list of people here who were arrested. I
wanted to ask you, are any of them in jail? Were any convicted
and in jail? And are these people, these nine circled here,
still on the lam? Are they still running?
Mr. Kubiak. Yes, ma'am. We have had a number of convictions
related to that and significant sentences for the case.
Senator Landrieu. Do you know how many convictions on
Honeygate?
Mr. Kubiak. Yes, ma'am, I do. I can give you the actual
number separately. I don't have it here. Nineteen people
indicted and eight companies also indicted, but I don't have
the number directly.
Senator Landrieu. If you can give us the convictions and
the average term of time that was awarded?
And then these nine that are still fugitives. Can you talk
about what we are doing to try to find them?
[The information follows:]
There were 9 convictions from Operation Honeygate. Here were the
sentences:
1. Stefanie Giesselbach--1 year and a day of imprisonment and
ordered to pay restitution in the amount of $17,116,073. Deported by
ICE.
2. Magnus von Buddenbrock--6 months' home confinement and ordered
to pay restitution in the amount of $500,000. Deported by ICE.
3. Yong Xiang Yan--18 months' imprisonment and ordered to pay
restitution in the amount of $2,953,515.
4. Hung Ta Fan--30 months' imprisonment and ordered to pay
restitution in the amount of $5,378,370. Deported by ICE.
5. Shu Bei Yuan--2 years' imprisonment and ordered to pay
restitution in the amount of $1,485,631. Now in immigration removal
proceedings in CA.
6. Hung Yi Lin--3 years' imprisonment and ordered to pay
restitution in the amount of $512,852.
7. Doug Murphy--6 months' imprisonment and ordered to pay
restitution in the amount of $26,642.
8. Urbain Tran--1 month imprisonment and ordered to pay restitution
in the amount of $704,403.
9. Jun Yang--3 years' imprisonment and ordered to pay restitution
in the amount of $2,890,284.
Mr. Kubiak. Yes, ma'am.
Just for clarification on the last point, the criminal
process of this actually does go through the regular Federal
court process separate from the bonding or civil process that
we talked about earlier and separately.
Those individuals that you indicated, as I mentioned in my
testimony, it was a global conspiracy. So we have individuals
in China and we have individuals in foreign countries as well.
Those individuals are indicted. There are red notices through
Interpol for those individuals, should they come into the
clutches of the United States, or if we are able to get their
extradition from a foreign country.
Senator Landrieu. How do we know that these folks that have
been identified as bad actors in Honeygate, and they are on the
loose, are not setting up sham corporations as we try to find
them?
[The information follows:]
HSI Chicago has filed for Red Notices with Interpol seeking the
location and arrest of wanted foreign individuals, German, Chinese and
Canadian nationals with a view to extradition to the United States
(when an extradition treaty exists) based on the arrest warrants issued
in the Northern District of Illinois. The Red notice is an
international alert used by police to communicate information about
crimes, criminals and threats to their law enforcement partners around
the world. The information disseminated via notices concerns
individuals wanted for serious crimes, missing persons, unidentified
bodies, possible threats, prison escapes and criminals.
Mr. Kubiak. Ma'am, I think that is a fantastic question, a
great point. And I would like to, rest assured, to the witness
earlier, Mr. Sanroma, that we are going to stay engaged and
continue to stay engaged actually on this case and this issue.
It is not fully concluded, obviously.
And we are feeding back information that we received to the
other Government agencies like Commerce and USTR, because what
we have done through that investigation, I think, has given us
a very unique look inside what is a global conspiracy by a
sophisticated criminal organization to circumvent the duties of
the United States and to dump commodities into the United
States. And what we are able to then do is share those
identified loopholes with the appropriate partners.
That has already been done with CBP, but allows other parts
of the Federal Government to then shore up those activities and
then make recommended changes.
You or Senator Coats had asked about recommendations. The
witnesses talked about transparency. I think we have already
begun some of that. We are working very closely with industry
on these cases and these issues. Obviously, once it gets into
the investigative mode, it is more difficult to talk about an
ongoing criminal investigation.
We had an undercover agent in a company for a year.
Obviously, that is not something we can disclose or talk about
during that process.
But that position allowed us, both CBP and HSI, to chase
containers of illicit honey around the United States and seize
the product much more effectively than we would otherwise have
been able to.
So we are taking that model now, and in your State as well,
we have built a more enhanced CBP and HSI seafood working group
that is very focused on this issue. We built a trade
enforcement coordination center, which is CBP and HSI colocated
resources at your port in New Orleans, working specifically on
the seafood issue.
And we are adopting the lessons learned from the larger
Honeygate investigation to apply that to these other
commodities.
Senator Landrieu. Let me ask you this, you know how some
law enforcement have the authority when they interrupt a drug
ring to confiscate all things related--farms, houses, boats, et
cetera? Do you all have that authority?
Mr. Kubiak. Yes, ma'am.
Senator Landrieu. So you can seize assets?
Mr. Kubiak. Yes.
Senator Landrieu. Of the criminal activity?
Mr. Kubiak. Yes, ma'am. ICE has the broadest Federal
investigative authority of any agency, actually. And our
combined abilities within the Immigration and Customs
environment as well as the normal title 18 charges that we can
cover allow us money laundering charges and asset forfeiture.
We apply those in major investigations.
Senator Landrieu. You can keep some of what you earn in
that way? Or does it all go back to the Federal Treasury?
Mr. Kubiak. It goes back into the Treasury asset forfeiture
fund. But then we are able, for specific purposes, to reimburse
investigative costs and reimburse other expenses associated
with investigations. So the investigative tools that we need,
the CBP can tap into that fund as well.
I want to be very clear, those three agents did a fantastic
job, but that was the letter that the honey industry wrote to
our agency. There was a large group of CBP officers, a DOJ
attorney, and a myriad of other people in other agencies that
contributed.
We invested in total, thus far, in that investigation,
about 43,000 investigative hours in the Honeygate activity.
That is about 20 agent years total in investigative time just
from our standpoint.
So when you look at a major investigation like that, it is
very resource intensive. You asked earlier, we have been
provided a lot of resources over the years. But, as you know,
we have a very broad authority, and our ability to implement
things like the training that we are doing with the trade and
our trade enforcement centers around the United States are
being expanded now.
Senator Landrieu. Okay, Mr. Wagner, do you have anything to
say, since you came so prepared. I don't want to not give you
an opportunity to just add something.
Mr. Wagner. I am perfectly fine. Thank you for the
opportunity.
And I think the work of the two gentlemen to either side of
me, we work very closely together. And like Mr. Kubiak just
pointed out, we play a key role at the ports of entry, using
our targeting assets to glean all the information from a case
like this, take the known pieces of intelligence that you had
referenced, take the sort of loopholes and how this enterprise
was able to operate, and feed that into our targeting and our
analytical systems that we work with ICE and we work with the
Office of Trade. And then our CBP officers on the ground at the
ports of entry check that cargo and feed that information back
into it. So it is great cooperation among these agencies.
CENTERS OF EXCELLENCE AND EXPERTISE
Senator Landrieu. Well, I am very interested in you all
setting up a shrimpgate or a crawfishgate as soon as you all
can.
And my final question, the Centers of Excellence, could you
comment about their effectiveness and how do you think these
may work in truly helping specific areas to focus? There are so
many different products and industries, having these Centers of
Excellence developing this expertise, do you feel like it will
help us be more effective?
Mr. DiNucci. Great question, Chairman. I do believe that is
the case. I think we have seen certain benefits already from a
facilitation perspective. We have seen the enforcement value as
well, more in the intellectual property arena, to be quite
honest.
But I think in the long run the center in Miami will be
dedicated to agriculture and consumable products. The idea
really, to be quite honest, 99 percent of importers we deal
with are above board and honest. But that 1 percent, when you
are talking about $2.4 trillion worth of trade, is a lot.
And I think where we go with the Centers of Excellence and
Expertise (CEEs) eventually is to have that kind of
relationship with the trade, a transparent relationship. So
those good guys--and they come all the time to the conferences
we go to. They come in the door here to testify. We will know
them.
The information they give us needs to be applied to those
guys that are not quite being so honest.
I think the CEEs are going to be driving us from that
point, to create that intelligence level, so we understand the
businesses, how they operate, where they operate, where they
source, why they source.
It will also give us insight into the schemes that are used
to evade. That will be, I think, the cornerstone of how those
CEEs operate. Reduce costs for legitimate partners and make
life a lot more difficult for the entities out there that are
attempting to evade or use other illicit activities to avoid
requirements.
Again, we have three that are really up and running right
now. I think from an enforcement perspective, we see value
added there. That is our pharmaceutical, electronics, and
petroleum.
But I think in the future, we are really looking to drive
that in that direction. But that will be a much closer
relationship with the trade. And I think that will be the
cornerstone in terms of really doing effective enforcement.
That trade, by the way, does include, ma'am, the domestic
industry.
Senator Landrieu. Well, thank you all very much. I am going
to close our subcommittee meeting at this point by thanking you
all for your testimony.
PREPARED STATEMENT
Stopping illegal dumping and robustly enforcing our trade
laws is important to protect and grow jobs here at home. It is
vital to American business and the American economy. I am
committed to do all I can, and I know this subcommittee is
committed as well, to do what we can do under the authorities
and roles and responsibilities that we have, to make sure that
these laws are in place, they are enforced, and people are
compensated fairly for injustice or for injury.
We invited Mr. Ronald Lorentzen, Deputy Assistant Secretary
for Enforcement and Compliance. He could not testify because of
a conflict. But we have received his testimony and will put
that into the record of this subcommittee.
[The statement follows:]
Prepared Statement of Ronald Lorentzen
The Department of Commerce (Commerce) appreciates the opportunity
to submit a statement for the record on the critical issue of trade
enforcement and to provide the Subcommittee with an update on
Commerce's commitment and efforts to enforce the trade remedy laws.
Enforcement and Compliance (E&C), within Commerce's International
Trade Administration (ITA), has responsibility for administering the
antidumping duty and countervailing duty (AD/CVD) laws. These laws
provide business and workers with a transparent mechanism to seek
relief from the market-distorting effects of injurious dumping and
unfair subsidization, and provide them with the opportunity to compete
on a level playing field.
While this statement focuses on the important matter of trade
remedy law enforcement, it is important to note the other activities
that E&C and ITA undertake to provide America's businesses and workers
a fair opportunity to compete in commercial markets worldwide and to
grow American jobs. In addition to AD/CVD law administration, E&C also
has the statutory authority for leading a program to monitor trade
agreement operation and to seek foreign government compliance with
their trade agreement obligations. Through the Trade Agreements
Compliance Program, E&C's staff works to break down trade and
investment barriers abroad and proactively monitors foreign government
compliance with trade agreement obligations. We now have a
comprehensive range of tools and expertise to help U.S. firms and
workers confront foreign trade barriers and unfair trade practices in
their quest for global growth and increased employment and
profitability at home. These include our coordination of the Trade
Agreements Compliance Program, administration of the U.S. AD and CVD
laws, and leadership of other efforts to monitor and address how
foreign governments' use of trade-distorting subsidies and trade remedy
measures may harm U.S. export interests.
As part of the Trade Agreements Act of 1979, the Congress
transferred from the Department of the Treasury to Commerce the
responsibility for administering the AD/CVD laws. And, then, in the
late 1980s, the Congress gave Commerce additional authority, under
section 781 of the Tariff Act of 1930 (Tariff Act), to deal with the
potential circumvention of AD and CVD orders. In exercising this
authority, and as a matter of daily business, we cooperate with U.S.
Customs and Border Protection (CBP), U.S. Immigration and Customs
Enforcement (ICE), and other Department of Homeland Security (DHS)
agencies, as appropriate, in a variety of ways to try to
counter and stop various duty evasion schemes that can thwart the
purpose and effectiveness of these important laws. We also work in
close cooperation with CBP, ICE, and the Department of Justice
(Justice) to assist them in enforcing the customs laws and ensuring
that our border measures are effective.
Commerce conducts AD and CVD investigations and administrative
reviews to determine whether imported merchandise is dumped (that is,
sold in the United States at less than fair, or normal, value) or
subsidized by foreign governments. If our investigation finds that
imports have been dumped or unfairly subsidized, and if the
International Trade Commission finds that a domestic industry has been
injured as a result of the unfairly traded imports, we issue an AD duty
or countervailing duty order. When that happens, we instruct CBP to
require importers to pay cash deposits whenever they import merchandise
subject to that order. Thereafter, on an annual basis, we will normally
conduct an administrative review of the entries of subject merchandise
from the past year to determine the actual level of dumping or
subsidization during the prior 1 year period.
Commerce's role in detecting and deterring the circumvention of AD
and countervailing duties is addressed in Section 781 of the Tariff
Act. Pursuant to those provisions, Commerce may conduct circumvention
inquiries when: (1) it is alleged that minor alterations have been made
to subject merchandise in order to evade AD/CVD orders; or (2) it is
alleged that merchandise subject to an order is completed or assembled
in the United States or other foreign countries from parts and
components imported from the country subject to the order. Commerce can
also find under these provisions that later-developed merchandise may
be included within the scope of an existing order.
If it is determined that an order is being circumvented, Commerce
may, after taking into account any advice provided by the International
Trade Commission, direct CBP to suspend liquidation of the entries and
require a cash deposit of estimated duties on all unliquidated
merchandise determined to be circumventing the order.
In 2006, E&C's predecessor, Import Administration, formally
established a Customs Liaison Unit, which falls under the direction of
our Deputy Assistant Secretary for AD/CVD Operations. The Customs
Liaison Unit serves as our primary staff-level liaison with CBP and ICE
on many of the fraud/evasion matters related to our AD/CVD measures.
The members of this staff meet regularly with personnel from CBP and
ICE to discuss enforcement issues, share information and coordinate our
interaction to address potential fraud and evasion of AD and
countervailing duties in a timely manner.
In February 2010, the AD/CVD Case Reference File within CBP's
commercial trade tracking system--the Automated Commercial Environment,
or ACE--went ``live.'' The ACE AD/CVD Case Reference File has allowed
Commerce to maintain much more efficient and effective communication
with CBP in the implementation and application of the AD and
countervailing duty rates.
For example, ACE enables the application of AD/CVD rates on a per-
unit basis, as opposed to the typical ad valorem rates. The application
of a per-unit amount is important to counter situations where companies
regularly understate the value of their imported merchandise. Cash
deposit rates are typically calculated ad valorem, i.e., as a
percentage of the entered value of the imported merchandise. By
undervaluing the merchandise, importers avoid paying the full duties
owed. To forestall such activity, we have resorted to the use of per-
unit rates in several AD cases including crawfish, honey, activated
carbon, and garlic from China, as well as fish fillets from Vietnam. As
an illustration, where Commerce has imposed a cash deposit rate of a
specific dollar amount per kilogram for an exporter's entries of a
particular product, even if the value of the merchandise is undervalued
upon entry, the full amount of the duties owed is being applied because
it is being applied against the kilogram quantity of imports, not the
underdeclared value.
Commerce recently amended its regulation governing the
certification of factual information submitted to Commerce by a person
or his or her representative during AD/CVD proceedings. The amendments
aim to strengthen the current certification requirements by mandating
that the party submitting the documents: 1) identify to which document
the certification applies, 2) identify to which segment of an AD/CVD
proceeding the certification applies, 3) identify who is making the
certification, and 4) provide the date on which the certification was
made. These new requirements will better ensure that parties and their
counsel can be held legally responsible for the authenticity of
specific documents and are aware of the consequences of certifying
false documents.
In the course of our proceedings, particularly our annual
administrative reviews, our staff occasionally discovers or is made
aware of information indicating the possible evasion of AD/
countervailing duties. When Commerce uncovers information that
indicates possible evasion of the AD/CVD laws, we have the statutory
authority to provide that information to the DHS. Between January 2012
and the present, Commerce has referred 30 evasion allegations to CBP.
Upon examination of the information provided, authorities at the
appropriate DHS agency may initiate an investigation which can result
in the imposition of civil or criminal penalties and fines on parties
involved in the evasion scheme. Once a fraud/evasion investigation
involving an AD/CVD case is initiated by ICE (whether based on a
referral from Commerce or CBP/ICE's own findings), Commerce is
frequently asked by CBP/ICE agents or the Assistant U.S. Attorney
prosecuting the investigation to provide assistance. Since early 2012,
Commerce has taken action to assist CBP, ICE, and/or Justice in
approximately 20 investigations of possible fraud or evasion with
respect to proceedings covering more than 12 AD/CVD orders.
Commerce also uses its own authority to enforce the AD/CVD laws and
ensure their effectiveness. Some of AD/CVD orders under which Commerce
has recently taken action to address enforcement concerns include,
among others, the AD/CVD orders involving honey, garlic, shrimp, solar
cells, and certain steel products.
For example, Commerce has made use of its authority to address
circumvention of AD/countervailing duties to enforce the order on honey
from China. In August 2011, Commerce received a complaint from domestic
honey producers that Chinese exporters were evading the AD duty order
on honey by mixing honey with rice syrup and then claiming the
resulting product was not subject to the duties due on imports of honey
from China. After reviewing all of the facts, Commerce issued a final
determination finding that blends of honey and rice syrup were, in
fact, circumventing the order and began collecting duties on entries of
honey and rice syrup blends from China, regardless of the percentage of
honey in the blend.
Commerce has also taken several steps to ensure that Chinese
exporters and U.S. importers of garlic do not engage in activities
designed to avoid the payment of duties. As noted above, Commerce now
applies a specific duty rate to ensure that duties are not evaded
through the undervaluation of imports. Most recently, Commerce
discovered during an administrative review that a Chinese garlic
producer was using its individual, relatively low AD rate to export
other producers' garlic, thereby evading a significant portion of the
actual AD duties owed. After uncovering this scheme, Commerce revoked
this producer's individual duty rate and instructed CBP this past June
to collect duties on all imports from this producer at the higher,
country-wide duty rate.
In 2012, while conducting an administrative review of the AD order
on frozen warmwater shrimp from China, Commerce received information
that one of the Chinese exporters, Hilltop International, had been
supplying false information to Commerce over a multiyear period.
Commerce rapidly assimilated vast amounts of information in order to
directly investigate the matter. Ultimately, Commerce concluded that
Hilltop made false statements in response to Commerce's first probe
and, given the seriousness of the matter, Commerce reopened prior
administrative review results regarding Hilltop. Upon re-examination of
the information, Commerce found that Hilltop engaged in the same
pattern of behavior in the prior reviews. As a result, the AD duties
due from Hilltop grew from zero, a finding which had been supported by
false information, to likely over $100 million.
With regard to the AD/CVD orders on solar cells from China, due to
concerns over potential evasion, Commerce, working with CBP,
established a certification requirement for U.S. importers who claim
that the solar modules they import are not subject to the orders. This
procedure requires U.S. importers and Chinese exporters who claim that
their modules do not contain solar cells produced in the PRC to certify
as to the accuracy of that representation, and to acknowledge that
failure to maintain the certification or substantiate their claim will
result in application of the country-wide AD and CVD cash deposit
rates. A subsequent benefit from this program has been Commerce's
ability to monitor imports of solar cells and modules from China. In
April 2013, Commerce analyzed CBP import data covering solar modules,
which suggested that some importers may either be improperly declaring
merchandise as not subject to the orders, or understating the entered
value of the subject imports to reduce their duty liability. We are
working with CBP to collect additional documentation and have requested
additional information from certain companies to monitor and ascertain
compliance with Commerce's certification requirements.
Commerce also works with CBP in other ways to mitigate the
undercollection of duties. In January of this year, in response to
concerns raised by domestic producers in the garlic, crawfish tailmeat,
honey, and canned mushroom industries, Commerce undertook a survey of
completed administrative reviews to determine if all appropriate
liquidation instructions had been issued for companies' whose
merchandise came into the United States under bond during specific
periods. Commerce identified the relevant liquidation instructions and
provided a chart to CBP identifying the exporter, relevant period, and
the applicable liquidation instructions. CBP was able to use this
information to look for uncollected AD duties and countervailing duties
with unexhausted surety bond coverage and to collect the duties or
refer the issue to Justice for litigation before the statute of
limitations for collecting on those bonds expires.
It is important to note that the flow of enforcement-relevant
information between Commerce and CBP goes both ways. Late in 2011, CBP
contacted Commerce with information suggesting that a party was
attempting to circumvent the AD order on steel threaded rod from China
by slightly altering the chemical make-up of the steel. This slight
alteration could have resulted in these products being treated as a new
product for which no AD duties would have been due. Commerce
subsequently initiated an anticircumvention inquiry into this matter
and found that these minor alternations to the merchandise did not make
the altered product a new class or kind of merchandise distinct from
that covered by the order. As a result, these products are subject to
AD duties.
Cooperation among Commerce, CBP, ICE, and Justice has resulted in
indictments, convictions, and prison sentences for evaders of AD/CVD
orders. For example, our work with CBP, ICE, and Justice resulted in
the arrest and 2010 indictment of German nationals involved in a
massive transnational series of arrangements to import Chinese honey
into the United States without paying the proper AD duties. The
information recovered following those arrests led to further arrests,
sentences, and deportations as late as 2012, all for having
fraudulently skirted the payment of AD duties.
The examples provided above illustrate the close and expanding
relationship between Commerce, Justice, ICE, and CBP with regard to
addressing circumvention and countering duty evasion. Commerce is
committed to strict enforcement of the unfair trade laws, and will
continue to work intensively and actively with our fellow enforcement
agencies to minimize circumvention and evasion of AD and countervailing
duties.
We thank the Subcommittee for its interest in these critical
issues, and we are grateful for the opportunity to comment for the
record.
ADDITIONAL COMMITTEE QUESTIONS
Senator Landrieu. We will leave the record open for 2
weeks. We will submit some additional questions.
Any additional information that you or anyone who is
interested in submitting to this subcommittee, as we consider
further legislation or further appropriations or further
actions, we will take under consideration.
[The following questions were not asked at the hearing, but
were submitted to the witnesses subsequent to the hearing:]
Questions Submitted to Edward T. Hayes
Questions Submitted by Senator Mary L. Landrieu
impact of dumping and countervailing duties
Question. I remain very concerned that the illegal dumping of
foreign goods continues to impact hard-working Americans in a wide
range of industries. I was very happy that I was able to convince the
International Trade Commission to launch a full investigation into the
Mexican sugar industry for dumping low-cost sugar on the American
markets. Over 150 commodities--including crawfish, honey and a host of
other goods that are produced in Louisiana--are currently protected by
an anti-dumping order.
Despite this legal protection, it has been difficult to compel
foreign importers to pay their fair share. As of 2012, the last full
year for which we have complete data, CBP was pursuing almost $1.8
billion in unpaid duties.
What effect do these illegally dumped goods have on your industry?
Answer. The antidumping duty orders for shrimp were imposed in
February 2005 after the ITC found that both the volume and market share
of illegally dumped shrimp had increased, largely stealing market share
and sales away from domestic shrimp. While these orders have helped
stabilize the domestic shrimp industry, our industry still only
accounts for about 10 percent of the U.S. market.
The ITC found that illegally dumped shrimp predominantly and
significantly undersold domestic shrimp both in the original
antidumping investigation and in the most recent (2011) sunset review
of the antidumping duty orders. This is important because price is one
of the most important factors in purchasing decisions. Changes in the
prices of illegally dumped imports affect the prices of domestically
processed shrimp to a significant degree. Price disruptions by
illegally dumped imports have caused significant price declines in
domestic shrimp. The American Shrimp Processors Association (ASPA) was
proud to actively support the original cases, the imposition of these
orders, and the continuation of the orders in the 2011 sunset review as
beneficial to processors, boats and Gulf coast communities.
Most U.S. processors' day-to-day business is done on a spot basis.
Processors send out weekly price lists to prospective customers.
Customers will often cite the lower price of illegally dumped imports
in negotiations with processors. Typically, the U.S. processor has to
match the import price, or risk losing the sale. The U.S. industry--
which largely consists of small businesses--has to compete with
illegally dumped imports on a daily basis.
As I testified at the hearing, as a result of illegally dumped
imports of shrimp from several countries, the American shrimp industry
has lost jobs and profits. If prices are too low, fishermen will not go
out and fish because they will not be able to recoup their expenses or
make a profit. Employment and financial performance of both shrimp
fishermen and processors have declined due to illegally dumped imports.
The Louisiana shrimp industry has faced these effects as much or
more than the industry in any other state. Louisiana's shrimp industry
now supports over 14,000 jobs and contributes 1.3 billion dollars to
Louisiana's economy. Illegally dumped imports threaten to erode the
Louisiana's shrimp industry's jobs and profits, as they have already
harmed the American shrimp industry as a whole.
Question. Can you provide a specific example of how dumped goods
from China have harmed your industry?
Answer. The China-wide entity dumping margin on shrimp is almost
113 percent. This means that imports from China have been sold at 113
percent less than their fair market value, which has led to significant
price undercutting, lost profitability, and lost jobs.
Question. What additional steps would you like to see the Federal
government take in order to make sure you are competing on a level
playing field with foreign producers?
Answer. The Federal Government can help ensure that the trade
relief that the U.S. industry has fought for and obtained is strongly
enforced so that it is meaningful. This Committee has already taken
several welcome steps, including:
--Directing Customs to consider adding affected domestic industries--
which have the most vested interest in enforcing our trade
laws--to the Trade Enforcement Subcommittee of its Advisory
Committee on Commercial Operations (COAC),
--Directives to Customs to provide public reports on its collection
and enforcement efforts and the challenges that prevent duty
collection,
--Encouragement of a joint legislative proposal from the Department
of Commerce and Customs to remove legal barriers to
information-sharing between them, and
--Urging the United States Trade Representative to include in the
principal negotiating objectives of the United States for trade
agreements the objectives of preventing evasion of U.S. trade
remedy laws.
Given the recognized problems with duty collection and evasion, we
also recommend that Congress emphasize trade enforcement in any and all
trade agreements, including the Trans-Pacific Partnership (TPP) and the
Trans-Atlantic Trade and Investment Partnership (TTIP) currently under
negotiation, and in any Trade Promotion Authority (TPA) framework. The
United States' trade agreements should reinforce that our trading
partners share our commitment to strong enforcement. Above all, they
must respect our laws.
The Federal Government should also promote the exchange of data
with domestic producers to facilitate enforcement efforts.
Additionally, as discussed further below in my answer to Question
2, the Federal Government should strengthen bonding requirements.
chinese dumping
Question. Unscrupulous importers of Chinese goods use a wide
variety of tactics to avoid paying their fair share of tariffs for
goods sold in the American marketplace. They use evasive tactics like
trans-shipping through a third country, or establishing temporary shell
companies that will be long gone when it's time to pay the final
assessed duty on their imports.
Unfairly traded Chinese commodities affect a wide range of American
industries. The top five antidumping and countervailing duty (AD/CVD)
cases for uncollected duties, collectively valued at more than $1.6
billion, all involve goods from China. I know that crawfish producers
are particularly concerned about low-cost imports from China being
dumped on the American marketplace.
Can you give me some examples of how Chinese predatory pricing
affects your industry?
Answer. The China-wide entity dumping margin on shrimp is almost
113 percent. This means that imports from China have been sold at 113
percent less than their fair market value, which has led to significant
price undercutting, lost profitability, and lost jobs. U.S. shrimp
processors have to check the prices of Chinese imports every day, as
purchasers will quote those prices in negotiations, and U.S. shrimp
processors often have to match the price or lose the sale.
Question. What more could CBP do to combat these under-valued
imports from China?
Answer. We respectfully recommend that the Subcommittee take the
following actions to combat these under-valued imports from China:
(1) Revert to cash deposits instead of bonds for new shipper
reviews;
(2) Direct Customs to increase bonding requirements for high-risk
industries in administrative reviews;
(3) Require Customs to report on whether it is requiring Single
Transaction Bonds (STBs) for imports subject to AD/CVD duties greater
than 5 percent; and
(4) Require Customs to report, for all AD/CVD cases in which there
are uncollected duties, the percentage where the foreign producer is
the importer of record and does not have a presence in the United
States.
Question. Increasing Bonding Requirements for High-Risk Industries
in Administrative Reviews
Answer. Indeed, Customs could address an even bigger problem--
insufficient bonding requirements for administrative reviews--through
its own administrative processes, without any need for additional
legislation or authority. We respectfully request that this
Subcommittee encourage Customs to do so. Bonding requirements could be
enhanced by CBP by new regulations without the need for legislation,
and ASPA urges CBP to start to take action this year to correct this
shortfall.
Currently, after an AD/CVD order is imposed, an importer must pay
cash deposits at the rate determined under the order and continue to
pay cash deposits at that rate unless the rate is changed via a
subsequent administrative review. Most of the trouble with AD/CVD duty
undercollection comes when the actual AD/CVD margin is determined to be
higher in such a subsequent administrative review. This means that the
importer owes a higher amount than what the importer had paid on the
cash deposits. The importer also owes interest on the underpaid duties.
When the importer has disappeared or does not have the resources to pay
the additional duties and interest, the only recourse is to recover
from the bond issuer.
As discussed above, most customs bonds are Continuous Entry Bonds,
which means that bond issuers generally have a low liability. Such
bonds can be used to cover imports that are subject to AD/CVD duties,
as long as the duties are not greater than 5 percent. If the duties are
greater than 5 percent, then Customs is supposed to require an STB,
which is generally in an amount not less than the total entered value,
plus any duties, taxes, and fees.
The problem is concentrated in just a handful of cases, primarily
in the aquaculture and agriculture industries, such as shrimp,
crawfish, and honey, where the imports subject to AD/CVD duties are
produced by hundreds of producers. Fragmentation in the foreign
industries allows players to appear and disappear without a trace. As I
noted at the hearing, seafood alone accounts for about 40 percent of
the duties that have not been collected since 2001, and most of that
amount is due to duties that have not been paid by importers of
crawfish and shrimp. As noted above, more than 90 percent of the
uncollected duties are from China.
While Congress and Customs tried to address the problem in these
industries with enhanced bonding requirements in the past, those
requirements were unfortunately struck down because they singled out
agriculture and aquaculture. An assessment of risk was not part of the
bill, placed on the record, or made by the agency.
But there is a way to make such requirements consistent with both
U.S. law and our WTO obligations by ensuring they are based on an
objective risk assessment rather than industry categories alone. Under
existing U.S. law, Customs could administratively require STBs rather
than Continuous Entry Bonds in high-risk industries subject to AD/CVD
orders where there is a history of non-payment. Customs has the
inherent authority to determine that STBs are required where that
determination is based on risk and on actual facts. We appreciate
Chairman Landrieu's and the Subcommittee's efforts to urge Customs to
use its inherent authority to strengthen trade enforcement.
A Customs representative acknowledged at the hearing that using
STBs and assessing risk might help address these problems.
During the hearing, Customs heavily stressed automation of STBs as
a solution to duty undercollection. Automation for bonds is helpful,
and we thank Chairman Landrieu and the Subcommittee for securing the
funding needed to accomplish such automation. But automation will only
make a difference if it accompanies an increase in bonding requirements
by CBP. Automation will not resolve the problem by itself.
counterfeit goods
Question. I'm deeply concerned about the tangled supply chain that
brings Chinese goods to the homes and dinner plates of American
consumers. In order to evade paying their fair share of customs duties,
Chinese manufacturers often employ unscrupulous shipping companies to
trans-ship their goods through a third country before delivery to the
United States. There are a number of foreign companies that brazenly
advertise these trans-shipping services on the Internet. Although it
angers me to think about foreign companies using these tactics to gain
an unfair market advantage over American producers, I am even more
concerned that these schemes, which conceal the origin of commodities,
may also compromise consumer safety.
For example, the vast majority of shrimp imported from China are
farm-raised, whereas almost all American shrimp are caught at sea.
Chinese producers have intensified the industrialization of shrimp
production in order to increase profits, often with environmental
impacts and workplace conditions that would be unthinkable in America.
There have been many cases of these cheap Chinese shrimp being
mislabeled for sale in the United States.
Can you describe how your industry has been impacted by the
presence of low-cost Chinese imports in the market place?
Answer. This is an excellent question that goes way beyond
international trade concerns, into the food safety arena.
On the food safety front, ASPA commends your efforts to get greater
inspection of foreign seafood imports. We do need to get our trading
partners like China to upwardly harmonize their health and safety
standards as quickly as possible. And ASPA believes that the U.S. could
really enhance that effort by raising our standards to the level of
Canada, the EU and Japan.
The US lags far behind the rest of the developed world with respect
to health and safety standards on imported shrimp. There are
significant health and safety concerns with imported shrimp, including
shrimp imported from countries currently engaged in the Trans-Pacific
Partnership Agreement (TPP) negotiations. FDA records indicate a
variety of health problems with imported shrimp from TPP countries,
including the presence of salmonella, banned veterinary chemicals, and
antibiotics. The current EMS problems in the Asia-Pacific region
elevate the health and safety problems, leading several countries to
actually block shrimp imports from EMS infected countries.
Clearly there is a problem on the health and safety front with
shrimp. For example, a graduate thesis submitted in May 2014 by an LSU
graduate student found that 92 percent of imported, farm-raised shrimp
samples tested positive for at least one drug that is banned for use in
food-producing animals in the United States.
Despite the serious health and safety risks associated with
imported shrimp, the current US inspection regime results in FDA
inspection of only approximately two-percent of imported shrimp. More
disturbing is the fact that US health and safety standards for shrimp
imports are lower than those imposed by other major export markets,
including the EU, Japan and Canada. This lax health and safety regime
places US producers and consumers in an unnecessary and vulnerable
world market position. Some of our trading partners require bilateral
health and safety agreements on shrimp with robust inspection and
certification programs. Canada and Japan have agreements with Vietnam
requiring Vietnam to inspect and certify that all shrimp exports are
free of banned chemical additives prior to export. Japan also subjects
Vietnam to a 100 percent inspection requirement at the border. The EU
is famously known for its robust shrimp safety requirements. ASPA is
promoting a program to upwardly harmonize US health and safety measures
on shrimp to standards equivalent to the EU and Japan. Several vehicles
exist for achieving this goal of adequate health and safety standards
for our public. The ongoing TPP negotiations provide an opportunity to
address these issues with TPP shrimp exporting countries (Malaysia and
Vietnam) either as part of the actual agreement or through separate
bilateral agreements. The Trans-Atlantic Trade and Investment
Partnership (TTIP) negotiations with the EU provide another platform
for the US to adapt and harmonize its standards with the EU. The US can
also develop regional health and safety standards through NAFTA, CAFTA
or other regional agreements. We believe that the health and safety
area is perhaps where we could obtain the greatest progress in
restoring balance with our foreign competitors (particularly Malaysia
and Vietnam). It might be appropriate to add measures to address these
health and safety concerns to the TPP agreement itself, the TPP
implementing legislation or the accompanying TPA legislation.
Question. How could CBP and ICE better protect your industry from
these types of counterfeit goods?
Answer. We don't really have a problem with counterfeit goods as
foreign farmed shrimp is considered ``like product'' to domestic wild
caught shrimp. Continuation of retail labeling requirements is really
important to consumer choice and differentiation of product. Continued
action on trade remedies with both appropriate antidumping and
countervailing duty actions is important to level the playing field.
And, finally better health and safety standards like those described
above would really help the domestic industry.
Transshipment needs to be stopped to combat duty evasion, but
health and safety issues are better addressed in other ways.
______
Questions Submitted by Senator Thad Cochran
Question. Mr. Hayes, the U.S. Department of Commerce has determined
that 7 countries (China, Ecuador, India, Indonesia, Malaysia, Thailand,
and Vietnam) are providing illegal subsidies to their producers in
order to help boost shrimp exports to the U.S. In 2012 alone, these
foreign illegal subsidies amounted to over $250 million. It doesn't
appear that the Department of Commerce has done much thus far to help
counterbalance the harmful impacts of those foreign subsidies to our
domestic industry. Can you discuss some ways Congress could be more
helpful to the domestic shrimp industry via legislation?
Answer. The American Shrimp Processors Association (ASPA) very much
appreciates the understanding of the magnitude of the illegal foreign
government subsidy challenge that the U.S. shrimp industry faces, as
well as your willingness to look at alternative ways to combat the
hundreds of millions of dollars in subsidies from seven key nations.
Addressing the illegal foreign subsidy problem is critical to the
future survival of the Gulf shrimp industry as the subsidy programs
soon begin to come online.
The Coalition of Gulf Shrimp Industries initiated an international
trade case in 2012 challenging billions of dollars in illegal subsidies
provided by foreign governments to their shrimp producers. The US
Department of Commerce determined that China, Ecuador, India,
Indonesia, Malaysia, Thailand, and Vietnam are providing illegal
subsidies worth over $250 million in 2012 alone. The chart below
summarizes the Department of Commerce's subsidy findings for 2012.
----------------------------------------------------------------------------------------------------------------
Country 2012 U.S. Imports Subsidy Margin Value of Subsidies
----------------------------------------------------------------------------------------------------------------
China.......................... $101,948,000 18.16%........... $18,513,757
Ecuador........................ $499,690,000 11.68%........... $58,363,792
India.......................... $551,245,000 10.84%........... $59,754,958
Indonesia...................... $634,008,000 0.25%............ $1,585,020
(de minimis).....
Malaysia....................... $142,001,000 54.50%........... $77,390,545
Thailand....................... $1,087,958,000 1.46%............ $15,884,187
(de minimis).....
Vietnam........................ $426,153,000 4.52%............ $19,262,116
Total...................... ............................. ................. $250,754,374
----------------------------------------------------------------------------------------------------------------
The damage from subsidized export production is ongoing and
increasing each year, but could be offset by tax credits to the U.S.
shrimp industry. Tax credits would give immediate relief for domestic
shrimp harvesters and producers and is a top ASPA legislative priority.
This moderate approach would help families, businesses and communities
harvesting and processing shrimp from the Gulf of Mexico and South
Atlantic combat unfair foreign competition.
ASPA proposes a Federal tax credit for shrimp harvesters based upon
the quantity of pounds harvested and reported on income tax forms by
any vessel with a license to harvest shrimp in the Gulf of Mexico and
South Atlantic. ASPA similarly proposes a Federal tax credit for shrimp
processors based upon the quantity of wild-caught pounds processed and
reported on income tax returns by any plant with a processing license.
For example, a tax credit of 50 cents per pound harvested would
give shrimp harvesters approximately $120 million of relief. Likewise,
a credit of 50 cents per pound processed would give shrimp processors
approximately $120 million of relief.
We are open to other tax credit approaches that would provide the
overall industry a total of about $250 million in relief to level the
subsidy playing field with our major foreign competitors. For example,
some portion of the relief could be provided by a tax credit tied to
energy efficiency and other similar infrastructure improvements made by
the domestic industry.
Other industries have received similar support and the domestic
shrimp industry is in desperate need of immediate relief to combat the
incoming surge of subsidized imports.
Additional measures that could be considered include:
i. Placement of shrimp subsidies into the Joint USTR/Department of
Commerce Annual Subsidies Enforcement Report;
ii. Negotiate elimination of subsidies in the ongoing TPP
negotiations (Vietnam & Malaysia);
iii. Request shrimp import price monitoring by the USTR/Department
of Commerce;
iv. Request monitoring of shrimp subsidies at the World Trade
Organization and seek dispute settlement consultations through USTR;
and
v. Engage in bilateral and regional consultations with foreign
governments and their producers to address illegal subsidies.
It might be possible to achieve some of these objectives in either
the implementing bill for the TPP Agreement or in the TPA legislation
that delegates authority from the Congress to the Executive Branch to
engage in trade negotiations. TPA legislation will also be necessary
for the Congress to pass prior to any consideration of TPP.
We appreciate this question and look forward to working with
Ranking Member Cochran of the full Appropriations Committee and
Chairman Landrieu of the Appropriations Homeland Security Committee to
prioritize and promote these relief measures important to the U.S.
shrimp industry.
Finally, we at ASPA very much appreciate the careful exploration of
the duty collection problem and the continued oversight by this
committee of CBP on this matter. And, we are confident that renewed
focus on the issues at CBP will yield results that will improve the
fortunes of our industry and many others.
______
Questions Submitted to Rick Blume
Questions Submitted by Senator Patty Murray
trade enforcement and jobs
Question. Strong and aggressive enforcement of our trade laws
protects America's workers and employers against unfair trade
practices. Trade relief can and has prevented thousands of good paying
jobs in many industries from being moved overseas. Please explain what
is at stake for Nucor and the domestic steel industry if antidumping
and countervailing duty orders are not enforced and duties are not
collected?
Answer. The health of Nucor and other U.S. producers, and their
ability to preserve high-paying steelmaking jobs, depends on the
vigorous enforcement of U.S. trade laws and the aggressive collection
of duties. When massive volumes of unfairly priced steel enter the U.S.
market, U.S. steel producers and their workers suffer--production and
sales decline, mills are idled, plants are shut down, and worker hours
and take-home pay are reduced.
As only one of many examples, Mexico and Turkey have flooded the
U.S. market with unfairly traded steel reinforcing bar (``rebar'') in
recent years. Imports of rebar from these two countries increased over
124 percent from 2010 to 2013 and now represent approximately 20
percent of the U.S. market, an increase of 13 percentage points from
only 3 years before. This unfair trade has been devastating to the
domestic industry. Nucor has had to reduce employee hours and pay at
several rebar mills, including Nucor Steel Seattle. Other U.S. rebar
producers have been forced to lay off workers and close facilities. To
address this harm, Nucor and other U.S. rebar producers filed a trade
case against rebar from Mexico and Turkey in September 2013. Unless
relief is granted, conditions will only worsen for the U.S. industry
and its workers.
Unfortunately, the rebar case is not unique. The domestic steel
industry has endured similar harm time and time again with respect to a
variety of steel products, compelling Nucor and other domestic steel
producers to actively seek trade relief under U.S. trade remedy laws.
Obtaining relief from surging, unfairly priced imports, like the rebar
imports that we are seeing now, is crucial if we are to prevent further
job loss, keep mills afloat, and allow domestic steel producers to get
back on their feet. However, Nucor and others can only benefit from
trade relief when orders are aggressively enforced, and duties are
collected. The domestic steel industry depends on the U.S. government
to ensure that this happens.
trade case process
Question. I am concerned that trade cases may not be providing U.S.
companies the relief intended to protect and keep jobs in this country.
In addition to trade cases being complex, burdensome, and slow, the
process currently in place to address fraud and circumvention may also
be ineffective. You mentioned in your testimony examples of schemes
used by foreign producers to fraudulently circumvent U.S. antidumping
and countervailing duties. Can you elaborate on some of your specific
experience and highlight the problems your industry has encountered
with the way the current system works? And from your perspective, what
are the key components of an effective process and what suggestions
does Nucor have for improving the current process?
Answer. In recent years, Nucor has encountered numerous instances
of fraud and circumvention, as foreign producers increasingly turn to
shell companies, fabricated and falsified documentation, transshipment,
and other schemes to avoid paying duties. These blatant trade
violations have resulted in significant harm to Nucor and other
domestic steel producers, and have directly undermined the trade relief
that they have fought so hard to obtain. I will provide a few examples
for the Committee.
In the 2010 investigations of Certain Steel Grating from China,
Chinese manufacturers received substantial antidumping (``AD'') and
countervailing duty (``CVD'') margins--a combined rate of nearly 300
percent--after the Department of Commerce (``Department'') discovered
that they had provided fabricated mill test certificates for the steel
used in their production of grating and ``deliberate(ly) conceal(ed)''
information from the agency.\1\ However, even before the investigation
concluded, Chinese producers were actively scheming to evade duties.
Almost immediately after the Department preliminarily determined that
Chinese producers were shipping dumped and subsidized product to the
U.S. market at significant margins, imports of steel grating from
``Malaysia'' began to arrive at U.S. and Canadian ports. These imports
were represented as coming from a company that had no Malaysian
operations and were clearly Chinese imports in disguise. In fact, there
had been no imports of steel grating from Malaysia at any time between
2001 and 2010.
---------------------------------------------------------------------------
\1\ See Issues and Decision Memorandum accompanying Certain Steel
Grating from the People's Republic of China, 75 Fed. Reg. 32, 366
(Dep't Commerce June 8, 2010) (final det. of sales at less than fair
value) at 11-19; see also Certain Steel Grating from the People's
Republic of China, 75 Fed. Reg. 32, 366 (Dep't Commerce June 8, 2010)
(final det. of sales at less than fair value); Certain Steel Grating
from the People's Republic of China, 75 Fed. Reg. 32, 362 (Dep't
Commerce June 8, 2010) (final aff. countervailing duty det.).
---------------------------------------------------------------------------
In another case, Cut-to-Length Carbon Steel Plate from China,
Chinese steel producers made commercially insignificant changes to
their steel in order to circumvent duties on cut-to-length plate. A
number of Chinese producers began adding small amounts (.0008 percent)
of boron to their steel in order to classify the steel as an alloy
product not subject to duties.\2\ Nucor and other domestic steel
producers brought a circumvention case, alleging that adding a small
amount of boron to plate is a minor alteration that does not exclude
the product from duties. The Department resoundingly agreed, concluding
that the steel was subject to duties.\3\ Even after this clear ruling,
other Chinese producers were continuing this practice. As a result, the
domestic industry was forced to file yet another request with the
Department, which found that all merchandise, regardless of the
producer, containing minimal boron was covered by the trade remedy.\4\
---------------------------------------------------------------------------
\2\ Certain Cut-to-Length Carbon Steel Plate from the People's
Republic of China, 76 Fed. Reg. 50,996, 50,997 (Dep't Commerce Aug. 17,
2011) (affirmative final deter. of circumvention of the antidumping
duty order).
\3\ Notice of Scope Rulings, 77 Fed. Reg. 32,568, 32,569 (Dep't
Commerce June 1, 2012).
\4\ See id.
---------------------------------------------------------------------------
Chinese producers have engaged in similar efforts with respect to
hot-rolled steel. In the most recently completed sunset review of the
trade remedy on Hot-Rolled Steel Products from China, India, Indonesia,
Taiwan, Thailand, and Ukraine, the International Trade Commission
specifically found that:
Published descriptions of exports of Chinese hot-rolled coil
(`HRC') include terms such as `commercial-grade, boron containing HRC,'
suggesting that some volume of hot-rolled steel exports with elevated
boron levels (possibly within micro-alloy levels specified in the scope
of the current reviews) might be classified for export purposes as
alloy steel product rather than carbon steel product.\5\
---------------------------------------------------------------------------
\5\ Hot-Rolled Steel Products from China, India, Indonesia, Taiwan,
Thailand, and Ukraine, Inv. Nos. 701-Ta-405, 406 and 408 & 731-TA-899-
901 and 906-908 (second Review) (USITC Pub. 445) (Jan. 2014).
---------------------------------------------------------------------------
Notably, other countries such as Thailand have pursued trade cases
against China to address this scheme.\6\
---------------------------------------------------------------------------
\6\ Global Trade Alert, Thailand: Imposition of antidumping duties
on flat hot rolled steel from China (May 29, 2012).
---------------------------------------------------------------------------
Nucor's customers have also faced circumvention of orders on their
products. For example, almost immediately after the Department issued
its final results in Certain Oil Country Tubular Goods (``OCTG'') from
China, Chinese producers started shipping their OCTG to Indonesia for
minor processing before exporting the final product to the United
States duty-free.\7\ In response, the Department conducted an
investigation in which it ultimately concluded that these minor
``processes do not substantially transform the OCTG at issue,'' and
that the processed steel is still subject to duties.\8\
---------------------------------------------------------------------------
\7\ See, e.g., Memorandum To Chris Marsh, Deputy Assistant
Secretary for Antidumping and Countervailing Duty Operations Through
Richard O. Weible, Director, AD/CVD Operations and Angelica Mendoza,
Program Manager, Ad/CVD Operations re: Final Scope Ruling on Green
Tubes Manufactured in the People's Republic of China and Finished in
Countries Other than the United States and the People's Republic of
China (Feb. 7, 2014).
\8\ Certain Cut-to-Length Carbon Steel Plate From the People's
Republic of China, 76 Fed. Reg. 50,996, 50,997 (Dep't Commerce Aug. 17,
2011) (affirmative final deter. of circumvention of the antidumping
duty order).
---------------------------------------------------------------------------
In sum, lengths to which foreign producers will go to avoid paying
duties are endless. When one door closes, they simply look for the next
one to open, making the need to vigorously address these trade
violations all the more urgent.
Regarding what improvements are needed in the current process,
Nucor suggests the following:
--First, processes to address fraud and circumvention should be
transparent. Customs should not be a ``black box''--the agency
should keep companies informed of the actions and steps that it
is taking to address any allegations submitted.
--Second, evasion should be addressed promptly. Customs should
operate within reasonable timelines for conducting its
investigations of fraud and circumvention to ensure that
evasion is promptly addressed. Every day that circumvention
continues is another day that U.S. companies and their workers
are being denied the trade relief to which they are entitled.
--Third, Customs, Commerce, and other government agencies should be
allowed to share proprietary information regarding potential
schemes to violate U.S. trade remedy laws.
--In addition, timely public reports on fraud and circumvention
investigations should be published on a regular basis. This
would serve a dual purpose. These reports would deter companies
who are tempted to evade duties and would increase agency
accountability.
--Finally, greater resources should be devoted to preventing and
investigating fraud and circumvention.
We believe these steps will help promote the effective enforcement
of trade remedy orders. Thank you again for the opportunity to testify
on this important issue. We look forward to continuing to work with the
Committee, Customs and Commerce to improve trade enforcement.
Questions Submitted to John Wagner and Richard DiNucci
Questions Submitted by Senator Mary L. Landrieu
antidumping/countervailing duty evasion
Question. Your fiscal year 2012 Antidumping and Countervailing Duty
Enforcement Report indicates that five commodities imported from China
(fresh garlic, crawfish, wooden bedroom furniture, honey and mushrooms)
make up approximately 90 percent of the uncollected antidumping/
countervailing duties (AD/CVD). Some of these bills date back to the
early part of last decade. I know that CBP has a process in place for
debt collection, which can take a considerable amount of time. But, a
decade-long delay to collect a tariff is clearly outside the scope of
what's reasonable.
What are the primary issues preventing the collection of these
duties? Please give me some insight into what your strategy is to
resolve this situation.
Answer. The actual amount of dumping or subsidization is not known
at the time of entry, which is the time when U.S. Customs and Border
Protection (CBP) has the best opportunity to enforce collection of the
duties properly owed to the U.S. Government. Inherent in the
retrospective nature of the U.S. antidumping and countervailing duty
(AD/CVD) process is the fact that AD/CVD-related reviews conducted by
the U.S. Department of Commerce (Commerce) can take up to 18 months and
at that point, Commerce will issue a notice of final results in the
Federal Register. A legal challenge to this notice can extend this 18-
month period for several more years. Following the Federal Register
notice and possible legal challenge, a 6-month period then begins in
which the Department of Commerce must issue liquidation instructions
and CBP must liquidate the associated entries. On average, more than 2
years pass between the entry date and the date when CBP can begin
collection efforts. Principals (importers) or sureties are also
afforded an additional 90- or 180-day period to file a protest after
the liquidation of the entry. At any time during these stages,
companies may go out of business, file for bankruptcy, or otherwise
evade AD/CVD collection efforts. Indeed, hundreds of millions of
dollars' worth of AD/CVD bills have no remaining bond coverage and the
connected importers cannot be located and/or have no assets within U.S.
jurisdiction. These issues are also compounded by insolvent sureties
and legal challenges from the sureties whose bonds secure the AD/CVD
bills.
A key component of CBP's current strategy to improve collections on
AD/CVD debts involved the creation of a permanent team within CBP
dedicated solely to the collection of AD/CVD debts. In March 2014, CBP
stood up an AD/CVD Collections Team consisting of four full-time
members.
CBP continues to utilize the Agency's legal authority to require
additional security in the form of a Single Transaction Bond (STB) to
protect the revenue when CBP has reasonable evidence that a risk of
revenue loss exists. These efforts to require additional security have
been particularly effective at simultaneously protecting the revenue
while facilitating compliance when utilized with regard to AD/CVD
importations. On May 1, 2012, a memorandum providing detailed guidance
to CBP Field Offices was issued to expand the frequency and efficiency
with which CBP utilizes this tool. CBP has partnered with Commerce in
this effort to better utilize bonding as a means to improve
collectability. CBP's Centers of Excellence and Expertise are also
engaged in setting STB amounts and making additional security
determinations for participating importer accounts. This practice was
challenged and upheld recently at the U.S. Court of International
Trade.
CBP has established key partnerships with Commerce, U.S. Department
of the Treasury, Office of the U.S. Trade Representative, U.S.
Immigration and Customs Enforcement's Homeland Security Investigations,
and other partner agencies to improve AD/CVD collections. The future of
AD/CVD collections will continue to rely on these key partnerships to
identify and address patterns of non-payment. Partnerships with the
trade community are also critical. U.S. industry, trade associations,
importers, brokers, and sureties provide critical insight to CBP on AD/
CVD collections issues. CBP meets regularly with representatives of the
surety and customhouse brokerage communities to discuss AD/CVD issues.
Question. Is there anything that can be done at this point to
compel these importers to pay their fair share for selling their goods
in the American marketplace?
Answer. Entities are sometimes able to easily enter (and leave)
highly profitable markets for imported goods subject to AD/CVD, thereby
enabling AD/CVD avoidance and circumvention. Many legitimate importers
have few assets, are lightly capitalized or undercapitalized, are not
able to pay final antidumping and countervailing duty (AD/CVD), and may
already have gone out of business before the AD/CVD bills are issued.
Other importers are ``shell companies,'' which are also characterized
by having few assets and being lightly capitalized or undercapitalized,
and have no intention of paying any final AD/CVD bills.
Too frequently, by the time U.S. Customs and Border Protection
(CBP) is able to take action to collect AD/CVD bills, the importers
have gone out of business, entered bankruptcy, or simply disappeared;
leaving few or no assets that could satisfy a judgment. Moreover,
available bond coverage is often limited, leaving the majority of the
AD/CVD bills unsecured. CBP is responding to the challenge of ``shell''
entities through advanced data analysis and trend identification to
target those companies that pose the highest risk to future revenue
collection. Concentrating CBP attention in these high-risk areas may
help to deter and prevent the circumvention of the AD/CVD laws and
reduce the amount of uncollected AD/CVD.
Question. What additional authorities or resource do you need in
order to make sure American companies are competing on a level playing
field with foreign producers?
Answer. Parties are using increasingly complex strategies to
attempt to evade AD/CVD, and CBP looks forward to working with its
interagency partners and Congress to ensure that CBP has the necessary
authority.
Question. In the harsh light of reality, approximately how much of
these AD/CVD duties --including those distributions due under the
Continued Dumping and Subsidy Offset Act (CDSOA)--are uncollectable?
Answer. Of the $2.3 billion in outstanding antidumping and
countervailing duty (AD/CVD) debts, $1.2 billion is potentially
disbursable under the Continued Dumping and Subsidy Offset Act program.
Of this $2.3 billion (40,130 bills), 27 percent of these bills are
associated with importer records that have a current status of inactive
or voided. Additionally, 86 percent of these bills are associated with
importer records that have shown no activity over the past 2 years.
When U.S. Customs and Border Protection (CBP) has exhausted all of
its collection efforts on these claims and they remain unpaid, CBP will
write off the claims. Write-off ceases active collection efforts,
however, CBP maintains records of the unpaid claims. If the company at
any point becomes an active business again, CBP will attempt to
collect. Write-offs are never pursued simply because of convenience.
trans-shipment
Question. There are many importers that willfully circumvent AD/CVD
regulations by shipping their goods through an intermediary country in
order to avoid tariffs. Some of these trans-shipment companies
blatantly advertise these illegal services on the Internet. There have
been other cases in which an importer intentionally undervalued,
misclassified or misrepresented merchandise in order to avoid paying
their fair share for access to the U.S. market.
How are investigations into this illegal activity initiated?
Answer. U.S. Customs and Border Protection (CBP) targets and
identifies antidumping and countervailing duty (AD/CVD) evasion through
import trade trend and valuation analysis, the use of targeted reviews,
lab testing, special operations, and audits to address high-risk cases.
The trade community also provides valuable trade intelligence on market
trends and specific allegations of AD/CVD evasion to help CBP in its
targeting efforts. CBP refers potential violations of criminal laws to
U.S. Immigration and Customs Enforcement Homeland Security
Investigations (ICE HSI) for criminal investigation, and supports ICE
HSI criminal investigations.
Question. What remedies are in place to punish those who willfully
disobey the law?
Answer. U.S. Customs and Border Protection (CBP) levies civil
penalties on importers for fraud, gross negligence, and negligence for
antidumping and countervailing duty (AD/CVD) violations under 19 USC
Sec. 1592. In fiscal year (FY) 2013, CBP levied 28 monetary penalties
for AD/CVD violations under 19 USC Sec. 1592 totaling over $15 million.
These penalties covered importers of AD/CVD commodities such as citric
acid, diamond saw blades, steel pipe, tires, and wire rod for AD/CVD
evasion, misclassification, and failing to properly file AD/CVD
entries. In some instances, CBP may seize shipments for certain types
of AD/CVD violations, such as smuggling. In fiscal year 2013, CBP and
U.S. Immigration and Customs Enforcement Homeland Security
Investigations (ICE HSI) seized shipments of AD/CVD commodities,
including honey and plastic bags, with a domestic value of over $6
million for violations of AD/CVD and related laws.
Criminal AD/CVD violations are investigated by ICE HSI, with CBP
support, and may result in criminal prosecutions.
Question. Can the U.S. government deny access to importers with a
history of AD/CVD avoidance?
Answer. CBP does not have the legal authority to refuse entry to an
importer on the grounds that the importer has a history of AD/CVD
avoidance. CBP takes all necessary measures to protect the revenue on
imports from such importers. These include requiring payment of duties
(including AD/CVD) before shipments are released to the importer
(``live entry'') and the posting of Single Transaction Bonds in the
amount necessary to protect the revenue. Importers with outstanding
bills for AD/CVD and other duties are put on national sanction, and are
subject to filing entry documents and duty payment at entry of goods
into the commerce. In some instances, CBP may seize shipments for
certain types of AD/CVD violations, such as smuggling. CBP works
closely with ICE HSI to penalize and disrupt distribution channels of
imported goods that seek to evade AD/CVD.
Question. What actions can you take against overseas companies that
advertise illegal trans-shipment services?
Answer. CBP takes all indications of evasion, including
advertisement of illegal transshipment services, very seriously and
employs all available methods in accordance with law to address these
matters. CBP targets shipment information for all known indications of
evasion and seeks to identify parties, such as importers and custom
brokers, with connections to illegal transshipment. CBP collaborates
closely with ICE HSI on illegal transshipment issues, and CBP works
with foreign customs authorities to identify and deter illegal
transshipment. While it is true that any party that is involved in the
importation of merchandize that violates Federal law may be held liable
for penalties, it may be difficult to enforce or collect such penalties
from overseas companies that are not subject to the jurisdiction of the
United States.
counterfeit goods
Question. As I noted during the first panel, I believe that these
complicated transshipment schemes obscure the true origin of a products
and undermine consumer safety. Or, at the very least, make it easier
for disreputable importers to traffic counterfeit goods. We have seen
many cases of mislabeled goods being brought to market in the seafood
industry.
What are some of the obstacles in place that keep you from
eliminating the importation of counterfeit goods?
Answer. Shipping methods used by counterfeiters have shifted in
response to improved U.S. Customs and Border Protection (CBP) targeting
efforts in traditional cargo environments. This shift, in addition to
improved Internet accessibility and the concomitant rise in Internet
sales, has fueled an explosive growth in the numbers of small packages
of counterfeit and pirated goods shipped primarily through express
carriers and international mail arriving in the United States.
Targeting small packages of goods shipped through these means is
extremely challenging due to the tremendous volume and the expedited
nature of the processing of such shipments. In addition, improvements
in the quality of counterfeit goods and the marks appearing on
counterfeit goods have made CBP's process of making infringement
determinations much more challenging.
Question. As Federal agencies with the authority to seize
counterfeit goods at the border, what additional resources do you need
to ensure American consumers are getting what they pay for?
Answer. The most effective resource Congress can provide to help
combat intellectual property crime is a continued examination of
intellectual property rights and attention on the issues that surround
this important issue that impacts the economy, trade, and job creation.
Apart from continuing to bring attention to intellectual property
issues, Congress should be aware that as the number of small shipments
of counterfeit goods increases, there is a direct increase in the CBP
resources required to identify, seize and forfeit these shipments. The
sophistication of the methods used by violators to avoid the detection
and interdiction of counterfeit goods also presents an obstacle to
CBP's enforcement efforts. Providing CBP with additional tools to
authenticate shipments of suspect goods would enhance CBP's enforcement
efforts.
Question. What additional resources do you need to investigate
these types of cases?
Answer. At this time, no additional resources are immediately
needed for CBP to support those U.S. Immigration and Customs
Enforcement Homeland Security Investigations (HSI) intellectual
property rights investigations and enhance our robust, collaborative
intellectual property rights enforcement efforts with HSI. CBP's role
is to target, examine and interdict shipments at the border. Through
these activities CBP gathers intelligence that can be used to further
investigations carried out by HSI. CBP also follows-up on leads
developed by HSI Special Agents in the field to determine when
shipments related to specific entities are entering the country and can
seize the goods to help build a case or coordinate those CBP
examinations with HSI in support of HSI criminal investigations. To
this end, CBP does not investigate criminal activity directly but
rather targets, examines and seizes violative goods and gathers
intelligence for HSI criminal investigation.
benefits of single transaction bonds
Question. Over the past few years, I have added and directed CBP to
use $3 million a year for development and increased use of single
transaction bonds. I understand that CBP has taken many steps to
improve this process and to bring greater transparency to this with the
imports with whom you do business.
Please discuss the benefits both to CBP and to the trade of the use
of these bonds.
Answer. U.S. Customs and Border Protection (CBP) has been working
on the development of eBond, an electronic system built on the
Automated Commercial Environment (ACE) platform that will automate many
of the basic and administrative functions associated with receiving,
processing, reviewing, approving/rejecting, and maintaining bond data.
A key part of this concept includes limiting only surety and surety
agents to send bond data to CBP. This will help protect CBP from
failure to collect due to potential litigation as a result of execution
errors ``accepted'' by CBP.
For the trade community, this eliminates the mandatory paper
requirement when an Single Transaction Bond (STB) is used to secure
cargo release. This will expedite the release of cargo process for the
trade community because they will not be restricted to normal business
hours just because they are using an STB so their entry can be
processed faster. Automating STBs will also allow for the expansion of
the remote location filing program which is currently restricted to the
members of the trade who have a continuous bond only.
For CBP, this provides a single, centralized repository for all
customs bonds within CBP. As a result, CBP will have better capability
to report to Congress on key inquiries regarding bonds. CBP anticipates
centralizing the STB process within the CBP Revenue Division to yield
significant strategic and financial benefits for CBP and other key
stakeholders by:
1. Increasing revenue collection by reducing write-offs and
delinquencies,
2. Enabling increased oversight and consistent application of
policies and procedures,
3. Supporting CBP and Department of Homeland Security Strategic
Goals,
4. Reducing time and effort required to locate and identify STBs,
5. Prioritizing resources based on specialization to align to
mission needs,
6. Promoting specialized knowledge and expertise leading to faster
bond processing, and
7. Reducing turnover and training needs.
Question. If you had additional resources to hire additional people
or make further technology improvements regarding these bonds, please
quantify what more could be done in regards to enhanced duty
collections and other capabilities.
Answer. CBP is currently in the process of automating the entire
bond process, which should further our capability. The automation
effort is already funded. This will be deployed on January 3, 2015, for
entries that are filed in ACE.
delays in bringing lawsuits to recover bonds
Question. In their testimony, both Mr. Steinberger and Mr. Sanroma
expressed their concerns about CBP's delays in bringing lawsuits to
recover bond collections for illegally dumped products such as honey
and crawfish.
Given the importance of these products to the many small businesses
working so hard to keep afloat, why has CBP delayed bringing lawsuits
to collect on overdue bonds?
Answer. U.S. Customs and Border Protection (CBP) shares your
concern, and those expressed by other members of Congress and U.S.
businesses, about the timeliness of CBP's collection efforts on
outstanding antidumping and countervailing duty (AD/CVD) claims against
sureties. CBP promptly pursues collection from both importers and
sureties of all billed and unpaid AD/CVD. Once an entry liquidates and
a bill is generated, CBP notifies the importer at the time of initial
billing and every 30 days after the due date until the bill is paid or
otherwise closed. Approximately 60 days after the initial bill date,
CBP will report outstanding bills on a Formal Demand on Surety for
Payment of Delinquent Amounts Due (informally known as the ``612
Report'') and every month thereafter until the bill is paid or
otherwise closed. In accordance with 31 C.F.R. Sec. 901.2, CBP also
provides an additional written demand informing the surety of the
consequences of failing to cooperate with the agency to resolve the
debt.
If CBP is unable to collect the applicable duties from either the
importer or surety via administrative collection processes, the debt
will be referred to the CBP Office of Chief Counsel (OCC) for legal
action if the principal amount is more than $1,500. OCC reviews each
claim for legal sufficiency and makes demands on delinquent sureties or
refers claims to the U.S. Department of Justice (DOJ) for litigation,
when appropriate. DOJ generally will only accept referrals for legal
action if the principal amount owed exceeds $2,500. If OCC's actions
exhaust the surety bond coverage but leave some amount of unpaid debt
by the importer, OCC refers the bills back to the CBP Revenue Division
for further research and/or to initiate termination of collection
procedures. The standard procedure, outlined above, results in the
successful collection of most outstanding duty bills and, when
necessary, the associated surety bond coverage.
This collection process, up to and including the filing of a
lawsuit against an importer, surety, or both, can take many years due
to: the pendency of a protest against one or more CBP determinations
with regard to the underlying claims; the need for a thorough legal
review by OCC; the impact of new court decisions on common issues;
negotiations and/or communications between CBP and the debtor parties;
the need for a thorough legal review by DOJ; and resource constraints
in CBP Office of Administration, OCC, and DOJ.
CBP faces significant legal challenges from the sureties whose
bonds secure the AD/CVD bills. CBP has worked with DOJ to file more
than 30 lawsuits against sureties in the U.S. Court of International
Trade. More than $316 million of the claims have been referred to DOJ
for litigation. In addition, CBP is working with DOJ to defend about
300 lawsuits, the majority of which have been brought by a single
surety, seeking refunds of AD/CVD payments already made, an amount
exceeding $85 million. Multiple lead cases are centered on issues of
liability and bond validity, in addition to other legal defenses. In
the 30-plus collection cases initiated by CBP, CBP is seeking to
collect more than $76 million under surety bonds securing imports of
crawfish tail meat, canned mushrooms, garlic, and honey. These cases
are in various litigation phases, from pleading to appeal. For example,
one lead case on unpaid AD/CVD bills is being briefed before the U.S.
Court of Appeals for the Federal Circuit (see United States v. Am. Home
Assurance Co., Court No. 2014-1292, appeal docketed February 12, 2014).
CBP is also working with DOJ to seek the fullest recovery possible
in the state insolvency proceedings of three former customs sureties.
These cases involve approximately $91 million in bonds securing over
$230 million in unpaid duties, much of which is AD/CVD. In addition to
litigating questions regarding the validity of the bonds, CBP has to
persuade state courts that its claims should be given commensurate
priority under state law. Even under the best circumstances, CBP will
not receive a full recovery of the bonded amount. These proceedings
have continued for more than 10 years, requiring an extensive
commitment of resources by both CBP and DOJ.
CBP recognizes its responsibility for requiring sureties to pay
completely on all their bonds that secure unpaid AD/CVD. The agency
will continue to pursue all appropriate avenues and options to secure
timely payment on these obligations.
targeting systems
Question. As the principal Federal agencies tasked with expediting
the flow of legitimate trade through our ports of entry, while rooting
out illicit goods and collecting appropriate duties, I applaud your use
of risk management strategies at the border. I encourage you to
continue to use risk management, rather than a ``one size fits all''
approach as you make decisions about whether to expedite or hold
incoming commerce.
Please provide some examples of how risk management has enabled you
to expedite the flow of commerce from trusted importers.
Answer. U.S. Customs and Border Protection (CBP) has the dual
mission of enforcing trade laws and facilitating legitimate trade. To
accomplish these dual goals, CBP uses a variety of methods to segment
risk. CBP uses risk assessments to target and focus resources on high-
risk security, admissibility, and health and safety issues for further
review, while moving compliant trade across the border. In a post-
release setting, account-based verifications and audits are performed
to ensure the process functioned properly and to refine risk
assessments based on outcomes.
CBP's increased confidence in known and trusted importers allows
the agency to focus its limited inspectional resources on high-risk
shipments. This risk-based process facilitates overall cargo processing
and helps cut transaction costs borne by the trade community and
consumers. The Importer-Self Assessment Program (ISA) is an example of
one mechanism that allows CBP to identify low-risk traders and justify
their facilitated treatment.
To participate in the ISA program, importers must demonstrate a
system of internal control designed to ensure compliant transactions.
To validate the importer's processes, CBP conducts a thorough review of
the importer's policies and procedures particularly for the risk areas
identified. The importer's responsibility is to demonstrate to CBP that
their controls activities over its customs related transactions are
adequately designed to ensure compliant transactions. Once the
importer's process is validated, they are assigned a national account
manager (NAM). The NAM's responsibility is to provide ongoing
monitoring and oversight activities and to prepare an annual risk
assessment for each ISA member. Some of the incentives offered to these
trusted partners include expedited cargo processing and release and
exemption from a Focused Assessment Audit. As of August 2014, there are
305 ISA members, which represents 24 percent of the total import value
into the United States.
Question. By employing this type of decisionmaking, are you able to
prevent or delay shipments from importers with a history of AD/CVD
evasion?
Answer. CBP targets shipments of importers with a history of AD/CVD
evasion, and takes all necessary measures to protect the revenue of the
United States. Such measures include requiring payment of duties
(including AD/CVD) before shipments are released to the importer
(``live entry'') and the posting of Single Transaction Bonds in the
amount necessary to protect the revenue of the United States. In some
instances, CBP may seize shipments for certain types of AD/CVD
violations, such as smuggling. CBP works closely with U.S. Immigration
and Customs Enforcement Homeland Security Investigations to disrupt
distribution channels of imported goods that seek to evade AD/CVD, and
pursue civil penalties as appropriate.
______
Questions Submitted by Senator Patty Murray
enforcement
Question. Enforcement of the trade remedy laws is one of the most
critical commercial functions of Customs and Border Protection. In
2008, CBP set up the ``e-allegations'' system so that interested third
parties could submit claims of Customs fraud and evasion.
Has CBP issued a subsequent report on the ``e-allegations'' program
from 2013 and do you have current data on how many ``e-allegations''
have been made this year and the status of those allegations?
Answer. Since the inception of U.S. Customs and Border Protection's
(CBP) e-Allegation program in 2008, our agency has received
approximately 10,000 allegation claims. Every allegation receives an
initial triage assessment to determine its level of criticality, and is
subsequently assigned for further analysis or action. CBP implemented
enhanced measures for tracking, reporting, and communicating
information about allegations with the trade community based on the
recommendations of a Government Accountability Office report in May
2012. CBP is continually working with our automated programming experts
from the Office of Information Technology to add fields to the e-
Allegations system that allow for streamlined reporting. CBP has
received more than 800 allegation claims thus far in fiscal year 2014,
of which approximately 23 percent are currently open under a state of
active analysis and/or pending results of targeting, investigation, or
other coordinated actions.
Question. What does CBP need to be more responsive to industry's
claims of antidumping/countervailing duties fraud and evasion and what
types of information from industry would be helpful to you and your
team in addressing these allegations?
Answer. CBP's most valuable partner in antidumping and
countervailing duty (AD/CVD) enforcement is U.S. industry. U.S.
industry provides critical insight to CBP on enforcement issues related
to developments in AD/CVD and other trade sensitive imports, and advise
CBP staff on the latest industry-wide changes for such commodities. CBP
meets regularly with U.S. industry representatives to discuss AD/CVD
circumvention schemes, and U.S. industry representatives share valuable
market and product intelligence with us. Specifically, CBP meets with
industry representatives to obtain market intelligence and commodity
expertise, and provide technical advice to make the measures more
enforceable. The more specific information that industry can provide,
and especially detailed information on individual shipments, is
especially valuable to addressing allegations from industry. By working
with the trade community, CBP deepens its understanding of the way
business and industry operates in the ever changing global marketplace
and leverages that information for risk analysis and targeting.
CBP has effective relationships with many U.S. industries, and
welcomes market intelligence, and allegations of AD/CVD evasion. CBP
reviews, responds to, and acts upon every allegation received, and
closely monitors to ensure that that allegations are responded to and
acted upon. CBP has specific protocols in place to ensure that CBP is
responsive to industry allegations while meeting the requirements of
the Trade Secrets Act and the Privacy Act.
CBP is also in the process of revising CBP Form 5106 (Importer I.D.
Input Record) to provide additional data on new importers and entities
doing business with CBP. This type of information will enhance CBP's
risk assessments of new importers in order to reduce instances of
unpaid duties (including AD/CVD) and abuse of trade and admissibility
law (such as AD/CVD evasion) through shell companies or other related
schemes.
inter-agency cooperation and information sharing
Question. Inter-agency cooperation is critical for detecting and
addressing circumvention and promoting strong trade enforcement. For
example, Customs and the Department of Commerce may obtain information
indicating that duty evasion is occurring, but they are limited in
their ability to share information with each other and with other
government agencies.
How can Commerce and Customs work with each other and with other
U.S. government agencies to strengthen trade enforcement and prevent
circumvention?
Answer. U.S. Customs and Border Protection (CBP) is committed to
ensuring that antidumping and countervailing duty (AD/CVD) laws are
vigorously enforced. To this end, CBP has established key partnerships
with the U.S. Department of Commerce (Commerce), U.S. Department of the
Treasury (Treasury), Office of the U.S. Trade Representative, U.S.
Immigration and Customs Enforcement Homeland Security Investigations,
and other partner agencies to provide comprehensive enforcement.
Commerce is one of CBP's key partners in AD/CVD enforcement. CBP holds
biweekly meetings at the working level and quarterly meetings at the
executive level with Commerce to coordinate AD/CVD-related
administration and enforcement activities. CBP and Commerce interact at
the working level on a daily basis on numerous technical issues. CBP
also meets, as needed, with Commerce, Treasury, and the Office of the
U.S. Trade Representative as a group to confer on AD/CVD issues and
collaborate on strengthening inter-agency efforts on AD/CVD
enforcement. CBP and its inter-agency partners have effective
collaboration on trade enforcement, and constantly work together on
ways to broaden this cooperation.
Question. Do you agree that barriers preventing Customs, Commerce,
and other government agencies from sharing proprietary information
hinder trade remedy law enforcement and should be removed?
Answer. We agree that the ability to share information between
government agencies assists with trade law enforcement, and CBP is
consulting with Commerce on how we can improve information sharing on
trade remedy law enforcement. Information sharing between government
agencies is essential to ensure that government agencies carry out
their respective responsibilities in trade remedy law enforcement. For
AD/CVD enforcement, CBP and Commerce share extensive information. CBP
provides substantial information to Commerce to assist with Commerce's
responsibilities as the administering authority for AD/CVD. Commerce
refers to CBP the allegations of fraud or evasion it receives from the
public in addition to evidence it uncovers during the conduct of its
own AD/CVD proceedings on a continuing basis, and provides vital
technical assistance to CBP on evasion-related issues.
______
Questions Submitted by Senator Thad Cochran
Question. Commissioners DiNucci and Wagner, It is my understanding
that data submitted by Vietnamese shrimp exporters change dramatically
from 1 year to the next, without explanation, and in ways that favor
their antidumping calculations.
Would you describe for the committee what the Department is doing
to verify any explanation or documentation that changes significantly
between review periods?
Answer. U.S. Customs and Border Protection defers to the U.S.
Department of Commerce.
Question. Will you verify the responses in the current 10th review
period?
Answer. U.S. Customs and Border Protection defers to the U.S.
Department of Commerce.
Question. Commissioners DiNucci and Wagner, as you may know, 40
percent (or $689 million) of all uncollected duties since 2001 is in
the seafood sector. Please explain to the committee why the U.S.
seafood industry has been hit disproportionately by duty evasion and
what specific measures are available to the CBP to address the problem?
Answer. The U.S. Department of the Treasury, in its July 2007
report on Duty Collection Problems, fiscal years 2003--2006,
specifically commented on the antidumping and countervailing duty (AD/
CVD) collection issues related to agriculture/aquaculture products
(including seafood) as follows:
. . . the collection problem with respect to this merchandise
appeared to be attributable to the fact that importers of
agriculture/aquaculture merchandise tended to be
undercapitalized, and that by the time final liability was
assessed (typically one or more years after the goods had
entered), many of the companies were no longer in operation.
Because the antidumping duties finally assessed often
significantly exceeded both the cash deposit and the bond
amount, CBP was left unable to collect the unsecured
(retrospectively assessed) portion of the duties assessed.
In 2004, U.S. Customs and Border Protection (CBP) recognized the
collection issues specific to AD/CVD agriculture and aquaculture
imports and, therefore, applied to AD/CVD shrimp imports a revised bond
policy, which the United States believed appropriately increased the
bond requirements commensurate to the risk of such imports. However,
the enhanced bond policy was challenged at the U.S. Court of
International Trade (CIT) and at the World Trade Organization (WTO),
where it was found inconsistent with U.S. WTO commitments and struck
down by the CIT. In April 2009, following the adoption of the WTO
Appellate Body's report finding that the enhanced bonding requirement
was WTO-inconsistent, CBP ended this program. CBP continues to explore
alternatives consistent with WTO rules that may allow it to set bond
amounts on the basis of risk.
CBP employs its legal authority to require additional security, in
the form of a Single Transaction Bond, to protect the revenue when CBP
reasonably believes that a risk of revenue loss exists on seafood and
other AD/CVD imports, on a case-by-case basis. These measures have been
very effective in protecting the revenue and facilitating compliance
with AD/CVD requirements. This practice was challenged and upheld
recently at the CIT.
CBP also works closely with the U.S. seafood industry to identify
and target seafood importers at risk of AD/CVD evasion.
______
Questions Submitted by Senator Richard C. Shelby
Question. For years, our Nation's export and import sector has
witnessed a number of methods used to evade and circumvent current
trade laws, including the transshipment of products from one country to
another before coming to the U.S. and the use of fraudulent content
identifiers. Despite trade laws designed to protect against unfair
practices, it is my understanding that dumping and subsidization of
foreign products through circumventing the system have become
increasingly common. This negatively impacts American businesses that
should be able to compete on a level playing field.
Do you believe that current enforcement activities of duty evasion
are sufficient?
Answer. U.S. Customs and Border Protection (CBP) is committed to
ensuring that antidumping and countervailing duty (AD/CVD) laws are
vigorously enforced. CBP takes all indications or allegations of
evasion very seriously and employs all available methods in accordance
with law to address these matters. While CBP's current enforcement
activities of duty evasion are effective, parties are using
increasingly complex strategies to attempt to evade AD/CVD. CBP needs
to constantly developing new approaches of AD/CVD enforcement to meet
the challenges posed by complex AD/CVD evasion schemes. For example,
CBP is aggressively employing its legal authority to require additional
security, in the form of a Single Transaction Bond, to protect the
revenue when CBP reasonably believes that a risk of revenue loss exists
on seafood and other AD/CVD imports. In fiscal year 2013, CBP piloted
AD/CVD audit surges to cover multiple importers of individual AD/CVD
commodities, and expand the reach of AD/CVD audits. These AD/CVD audit
surges measure the risk of a sector of AD/CVD imports, determine the
suitability of full audits, and provide informed compliance for future
imports. CBP will continue to closely monitor AD/CVD evasion schemes
and take the appropriate actions to counter these schemes.
Question. What specific actions is Customs and Border Protection
(CBP) carrying out to address duty evasion?
Answer. To target AD/CVD evasion, CBP employs significant national
assets from across the agency to enforce AD/CVD laws. CBP employs many
tools including import trade trend and valuation analysis, national
targeting through the AD/CVD National Targeting and Analysis Group, the
use of targeted reviews and audits to address high-risk cases, lab
testing, and special operations. The National Targeting and Analysis
Group based in Miami is responsible for CBP's Priority Trade issue of
AD/CVD and utilizes the Automated Targeting System to implement
efficient and effective risk management actions. This is done through
the development of targeting rules that are designed to identify
shipments posing a risk for evasion of ADCVD. These rules leverage pre-
existing enforcement information and also identify unusual trends
related to shipment activity. CBP collaborates with U.S. Immigration
and Customs Enforcement Homeland Security Investigations (HSI) to
substantiate and act upon allegations of duty evasion and to support
enforcement actions. CBP also partners with U.S. Department of Commerce
on a wide range of AD/CVD issues related to enforcement
responsibilities. CBP works closely with U.S. industry to obtain market
intelligence and technical expertise to enforce AD/CVD. CBP established
an AD/CVD working group under the Advisory Committee on Commercial
Operations of Customs and Border Protection to help address these
issues.
CBP is also in the process of revising CBP Form 5106 (Importer I.D.
Input Record) for new importers and entities doing business with CBP.
The goal of this revision is to provide additional data on and vetting
of new importers in order to reduce instances of unpaid duties
(including AD/CVD) and abuse of trade and admissibility law (such as
AD/CVD evasion) through shell companies or other related schemes.
Question. Does CBP have adequate resources to properly enforce our
Nation's trade laws, including defending against the practice of duty
evasion?
Answer. CBP is using its resources in new and innovative ways to
meet the challenges posed by complex duty evasion schemes. CBP is
undergoing a rigorous transformation of how the agency processes trade
through the formation of ten industry-focused Centers of Excellence and
Expertise (CEEs). The CEEs are enhancing CBP trade personnel's ability
to specialize in commodities (including those subject to AD/CVD),
building advanced knowledge in their respective industry, and
increasing CBP's understanding of trade risks such as duty evasion
schemes. CBP is also co-locating personnel with HSI personnel in
regional Trade Enforcement Coordination Centers in order to increase
CBP-HSI collaboration and focus on trade enforcement issues. CBP is
committed to ensuring that trade laws are enforced, and is
strategically using its resources to meet these challenges.
______
Question Submitted to Paul Piquado
Question Submitted by Senator Thad Cochran
Question. Assistant Secretary Piquado, the production of farm-
raised catfish is very important to my state and the antidumping action
against imported catfish from Vietnam is critical to rural jobs in the
domestic industry. Imports of the Vietnamese fish were at their highest
level last year, and remain at incredibly low prices, despite the
antidumping order. What are you doing to ensure that this order is
being effectively enforced and administered?
Answer. We are fully committed to vigorously addressing the market
distorting effects of unfair trade practices in strict accordance with
our trade laws, regulations and obligations.
The Department of Commerce (Commerce) published the antidumping
duty (AD) order in the case of Frozen Fish Fillets from Vietnam on
August 12, 2003. With respect to ongoing reviews, we published the
preliminary results of the (2012/2013) AD administrative review, and
concurrent new shipper review, on July 11 and 14, 2014, respectively.
Our comprehensive analysis in the AD administrative review resulted in
dumping margins ranging from $0.58/kg (17 percent) to $2.39/kg (38
percent). Regarding new shipper reviews, Commerce carefully examines
all requests for new shipper reviews to ensure that artificial
transactions are not used to secure an artificially low AD margin. In
the ongoing new shipper review of catfish from Vietnam, we found that
the sale used as the basis for the company's request for a new shipper
review and individual cash deposit rate did not meet the requirements
of U.S. law. If we affirm this determination for the final results,
imports from this company will remain subject to the Vietnam-wide rate
of 2.39 percent.
______
Question Submitted by Senator Richard C. Shelby
Question. For years, our Nation's export and import sector has
witnessed a number of methods used to evade and circumvent current
trade laws, including the transshipment of products from one country to
another before coming to the United States, and the use of fraudulent
content identifiers. Despite trade laws designed to protect against
unfair practices, it is my understanding that dumping and subsidization
of foreign products through circumventing the system have become
increasingly common. This negatively impacts American businesses that
should be able to compete on a level playing field.
--Do you believe that current enforcement policies concerning duty
evasion are sufficient?
--What specific actions is the Department of Commerce carrying out to
engage foreign governments and relevant entities on the issue
of duty evasion?
Answer. The Department of Commerce (Commerce) is committed to the
strong enforcement of the AD/CVD laws. As part of this commitment,
Commerce has forged strong partnerships with the Department of Homeland
Security's U.S. Customs and Border Protection (CBP) and the U.S.
Immigration and Customs Enforcement (ICE). Information sharing is
essential to successful enforcement and to this end, Commerce holds bi-
weekly meetings with CBP and ICE at the working level to discuss
enforcement issues, share information, and coordinate our interaction
to address potential fraud and evasion of AD and CVD laws in a timely
manner. Commerce and CBP also meet quarterly at the executive level to
coordinate and share information related to AD/CVD administration and
enforcement. Further supporting these efforts, Commerce forwards to CBP
and ICE's office of Homeland Security Investigations (HSI) on a
continuing basis any evidence of fraud or evasion it uncovers during
the conduct of an AD/CVD proceeding. Additionally, Commerce refers to
CBP allegations of fraud or evasion it receives from the public. Just
as significantly, Commerce also partners with the Department of Justice
(DOJ), providing technical support and information to assist DOJ in the
prosecution of any AD/CVD fraud that is uncovered. Commerce, CBP and
ICE/HSI also continue to consult on a regular basis on how we can
improve information sharing for purposes of strengthening trade remedy
enforcement going forward.
CONCLUSION OF HEARING
Senator Landrieu. So thank you all, and the meeting is
adjourned.
[Whereupon, at 4:12 p.m., Wednesday, July 16, the hearing
was concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
MATERIAL SUBMITTED SUBSEQUENT TO THE HEARING
[Clerk's Note. The following outside witness testimony was
received subsequent to the hearing for inclusion in the
record.]
Prepared Statement of American Wire Producers Association (AWPA)
introduction
The American Wire Producers Association (AWPA) appreciates the
opportunity to submit this written statement in connection with the
Subcommittee's hearing on ``Strengthening Trade Enforcement to Protect
American Enterprise and Grow American Jobs.'' Specifically, our members
would like to highlight the need to enact S. 662, ``Enforcing Orders
and Reducing Customs Evasion Act of 2012'' (ENFORCE, as approved by the
Finance Committee in July 2012) as an essential trade enforcement tool.
We remain firm in our view that the U.S. Government needs to be more
proactive in ensuring that foreign producers and exporters cease the
illegal evasion of antidumping and countervailing duties by
transshipping goods through third countries and illegally declaring the
goods as a product of that third country; falsifying documents to
misrepresent country of origin or misclassify the goods; and other
``creative'' means of evading the duties imposed on the goods by the
U.S. Government.
American wire and wire products manufacturers have been seriously
and adversely impacted by these trade-distorting policies, making it
almost impossible for our industry to compete with unfairly-traded
imports. The ENFORCE Act's provisions included in S. 662 will increase
the transparency, responsiveness and effectiveness of Customs and
Border Protection's (CBP) enforcement activities and thus, greatly
improve the effectiveness of our trade laws and the relief that they
are intended to provide to U.S. industries and American workers injured
by unfairly-traded imports.
background
The AWPA is a trade association which represents companies that
collectively produce more than 80 percent of all carbon, alloy and
stainless steel wire and wire products in the United States. The 82
member companies employ more than 20,000 workers in over 215 plants and
facilities located in 35 states and 139 Congressional Districts.
American wire and wire products manufacturers are entrepreneurial
and work hard to maintain their competitive market position despite
heavy import pressure on their products. They pride themselves on their
high productivity and constant reinvestment in the latest technology
and equipment, keeping the American wire industry one of the most
globally competitive segments of the steel industry.
circumvention and evasion of duties
Domestic producers and industries may petition the U.S. Commerce
Department and the U.S. International Trade Commission (ITC) to
investigate imports that are believed to be sold at less than fair
value or ``dumped'' in antidumping duty (AD) investigations or which
benefit from improper government subsidies in countervailing duty (CVD)
investigations. AD/CVD investigations and orders are the primary means
by which U.S. industries combat unfairly-traded imports. However, these
remedies are only effective to the extent the orders are enforced and
attempts to illegally evade the orders are stopped.
The Situation Today:
Foreign exporters and U.S. importers are increasingly using various
schemes to evade payment of AD/CVD duties when goods are imported into
the U.S. Evasion often involves transshipping products through a third
country, sometimes by repacking or relabeling the product, and then
using false documentation to declare that the third country is the
country of origin. Importers also may deliberately misclassify imports,
claiming that they are a different product or that they are excluded
from the scope of the case. Other common tactics to avoid AD/CVD duties
include subjecting the products to minor alterations or sending parts
to a third country where insignificant completion or assembly
operations are performed. Such products are then improperly identified
as a product of the third country in blatant circumvention of the
order.
These actions not only violate U.S. law and deprive American
companies of the relief which the AD/CVD laws are intended to provide,
they also result in hundreds of millions of dollars that are lost
annually to the U.S. Treasury in the form of uncollected duties from
wire and wire products alone. In addition, there are a host of other
industries being impacted, including glycine, honey, diamond saw blades
and tissue paper products. In these lean economic times, failure to
collect these duties is unconscionable and unacceptable.
AWPA Position:
A number of AWPA member companies have successfully obtained
multiple AD and CVD orders against imported wire products that were
found to be sold at dumped prices or unfairly subsidized by foreign
governments. These companies have experienced firsthand the effects of
the illegal evasion schemes used by foreign producers and U.S.
importers to evade the payment of lawfully-owed duties. These illegal
schemes have caused further injury to these companies and caused the
loss of more American jobs.
We fully support the enactment of the ENFORCE Act. This legislation
establishes a process for Customs and Border Protection (CBP) to
investigate claims that AD/CVD orders are being evaded:
--Domestic producers can formally petition CBP to investigate
possible evasion.
--Once an investigation is initiated, CBP must make both a
preliminary and a final determination as to whether an importer
is engaged in evasion.
To make a determination of evasion, CBP is directed to focus on
whether the correct amount of duty is being collected on the
merchandise, rather than on an importer's intent to engage in
evasion.
CBP is authorized, however, to use its full authority and
enforcement tools, including collaboration with Immigration and
Customs Enforcement (ICE) to pursue additional criminal charges
when an importer's intent is involved.
--CBP is required to act and publicly report on its findings within
set timeframes.
--The bill prescribes enforcement and remedial measures for each
determination, and specifically instructs CBP to use all its
existing tools to enforce the U.S. customs and trade remedy
laws.
The legislation does NOT give CBP the authority to expand the
existing scope of covered merchandise or expand CBP's existing
authority to investigate goods subject to AD/CVD orders.
We look forward to working with the Members and staff of the
Homeland Security Subcommittee on this serious trade enforcement
problem. In these challenging economic times, we are not asking for
special treatment, just the opportunity to compete fairly with our
international trading partners.
Also I have attached my testimony (see below) from a Small Business
Committee hearing held earlier this year which details my long, arduous
and very expensive trade enforcement fight which continues to this day.
Sincerely,
[This statement was submitted by Milton Magnus, President, American
Wire Producers Association]