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GAO report finds $2.3 billion in unpaid import duties

The federal government failed to collect more than $2.3 billion in duties and fees assessed on imported goods that the Commerce Department flagged as dumped on the American market between 2001 and 2014, according to a Government Accountability Office report released Monday.

The GAO said that, while the Customs and Border Protection agency, which is responsible for issuing and collecting duties, gets most importers to pay, "it only collects, on average, about 31 percent of the dollar amount owed.”

Customs officials told the GAO they do "not expect to collect” up to $1.6 billion of the outstanding debt. The GAO found that 95 percent of the unpaid duties were for goods imported from China.

The GAO said billing delays of up to 2.5 years from when goods are imported to the U.S. and when Customs and Border Protection levies anti-dumping duties on those goods can lead to non-payment. 

The GAO also faulted the wide differences between "the initial estimated duty rate and the final duty rate assessed” as a contributing factor for unpaid bills. “Importers receiving a large bill long after an entry is made may be unwilling or unable to pay,” it said.

It noted one company, an importer of wooden bedroom furniture not identified in the report, that owed $220 million in import duties for goods brought into the U.S. between 2004 and 2007. Customs and Border Protection issued the company its first bill in 2010.

Importers seeking to avoid payment entirely sometimes reincorporate under a different name. This tactic makes it “extremely difficult and resource-intensive” for Customs officials to collect payment from the newly incorporated company, the GAO said.

The top three products most associated with unpaid import duty bills were fresh garlic, wooden bedroom furniture, and preserved mushrooms.

The GAO found the bulk of the unpaid trade penalties were “concentrated among a small number of importers,” with 20 companies accounting for half of the $2.3 billion in outstanding bills. Of that figure, the GAO said $2 billion was in principle, and $321 million was in accrued interest.

The average size of the unpaid bill was $57,000, although the GAO identified “127 unpaid bills for at least $1 million, with the largest totaling over $12 million."

Companies that do not pay their bills are subject to sanctions. The CBP “would require full payment of all estimated duties, taxes, and fees,” the GAO said, before it would allow the imports into the country.

Customs and Border Protection officials told the GAO they are considering using “private collection agencies to pursue debts” from some companies.

Jim Crumpacker, director of the Department of Homeland Security’s office of liaison between the GAO and the DHS inspector general, generally agreed with the GAO’s recommendations for increasing collections, but took issue with part of the GAO’s statistical analysis high-risk imports.

Crumpacker said the GAO’s methods “may have produced results that understate the impact of the duty evasions relating to high-risk imports from China, which accounts for 95 percent of all uncollected [duties].”

He said Customs and Border Protection will “conduct its own analysis using methods based on country of origin” to help it identify risky importers, and reduce non-payment of import duties.

The Department of Commerce is responsible for identifying imports sold in the U.S. at unfairly low, or subsidized prices. These goods, which are considered to be “dumped” on the U.S. market, are subject to anti-dumping and countervailing duties, which are aimed at mitigating the effects of unfair trade practices on U.S. manufactures.

George Mason University economics professor Donald Boudreaux told AMI Newswire such anti-dumping duties are actually "punitive taxes" on American consumers who "take advantage of especially good deals offered by foreign suppliers."

"The very point of such 'duties,' is to force American consumers who insist on buying those imports to pay higher prices for them - higher prices that reflect the 'duties.' " Boudreaux said. 

"Despite the strained, often downright illogical arguments offered to justify [import duties] economically," he said, they are "special privileges given to politically influential domestic producer groups."

Boudreaux said anti-dumping duties "make consumers poorer and, indeed, make the economy as a whole less prosperous."