[Senate Hearing 113-]
[From the U.S. Government Publishing Office]





 
STRENGTHENING TRADE ENFORCEMENT TO PROTECT AMERICAN ENTERPRISE AND GROW 
                             AMERICAN JOBS

                              ----------                              


                        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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \4\ 4 Id.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \8\ CBP, ``Fiscal Year 2012 AD/CVD Enforcement Results'' (Jan. 14, 
2013).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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]