GAO Report on CBP's Challenges in Addressing Illegal Textile Transshipment
The General Accounting Office (GAO) has issued a report entitled, International Trade: U.S. Customs and Border Protection Faces Challenges in Addressing Illegal Textile Transshipment in response to requests from the Chairmen and Ranking Minority Members of the House Ways and Means Committee and the Senate Finance Committee.
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CBP's Current Textile Review Process is Dependent on Foreign Factory Visits
Given the resource constraints at CBP ports, CBP's textile review process for preventing illegal textile transshipment increasingly depends on information from foreign factory visits that CBP conducts, based on CBP's targeted analysis of available trade data. However, CBP's foreign factory visit reports are not always finalized and provided to ports, other agencies, or the foreign governments for timely follow-up.
Further, after the global textile quotas end in 2005, CBP will lose its authority to conduct foreign factory visits in former quota countries.
(In 2002, CBP targeted about 2,500 textile shipments out of more than 3 million processed, or less than 0.01%. However, about 24% of these reviews resulted in exclusions, 2% in penalties, and 1% in seizures. The GAO notes that CBP has increasingly relied on exclusions rather than seizures or penalties for textile transshipment enforcement because it is easier to exclude transshipped goods than to seize them as less evidence is required. In addition, CBP often does not assess penalties against importers of excluded merchandise because it is difficult to attach specific culpability to the importer.)
GAO Recommends Follow-up of Factory Visits, Posting Import Specialists Abroad
In order to improve information available for textile transshipment review at CBP ports and to encourage continued cooperation by foreign governments, the GAO recommends that the CBP Commissioner take the following two actions:
Improve foreign factory visit follow-up by immediately entering all criteria resulting from overseas factory visits in the Automated Commercial System (ACS) to trigger port reviews.
Assign import specialists to Custom Attach Offices in high-risk textile transshipment countries to assist with textile monitoring and enforcement activities, including conducting follow-up to foreign factory visits.
GAO Also Examines Role of In-Bond System in Textile Transshipment
The GAO explains that under the in-bond system, foreign textiles and apparel can travel through the U.S. before formally entering U.S. commerce or being exported to a foreign country.
However, weak internal controls in this system enable cargo to be illegally diverted from its supposed destination, thus circumventing quota restrictions and payment of duties. The GAO adds that CBP's penalties do not deter in-bond diversion as bond amounts can be set considerably lower than the value of the cargo, and violators may not view the low payments as a deterrent against diverting their cargo.
GAO Makes Recommendations to Improve Monitoring of In-Bond Cargo
In order for CBP to improve its monitoring of in-bond cargo and ensure compliance with U.S. laws and enforcement of national security, the GAO makes the following recommendations to the CBP Commissioner:
Place priority on timely implementation of a fully automated system, including more information to properly track the movement of in-bond cargo from the U.S. port of arrival to its final port of destination.
Increase port targeting and inspection of in-bond shipments;
Routinely investigate overdue shipments and, pending implementation of an improved automated system, require personnel at ports of entry to maintain accurate and up-to-date data on in-bond shipments; and
Assess and revise as appropriate CBP regulations governing (1) the time intervals allowed for in-bond shipments to reach their final destinations, taking into consideration the distance between the ports of arrival and the final port of destination, and (2) whether importers or carriers can change the destination port without notifying CBP.
The GAO notes that the Department of Homeland Security (DHS) has reviewed a draft of this report and agreed with the GAO's recommendations. DHS also stated that it would take the appropriate steps necessary to implement these recommendations.
GAO Report (dated January 2004) available at http://www.gao.gov/cgi-bin/getrpt?GAO-04-345