United States Government Accountability Office

GAO Report to the Chairman, Committee on 

Ways and Means, House of 

Representatives 

INTERNATIONAL 

TRADE 

Customs’ Revised 

Bonding Policy 

Reduces Risk of 

Uncollected Duties, 

but Concerns about 

Uneven 

Implementation and 

Effects Remain 

October 2006 

 

GAO-07-50 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

October 2006

INTERNATIONAL TRADE 

Customs’ Revised Bonding Policy 

Reduces Risk of Uncollected Duties, but 

Concerns about Uneven Implementation 

and Effects Remain 

Highlights of GAO-07-50, a report to the 

Chairman, Committee on Ways and 

Means, House of Representatives 

Since 2003, the Department of 

Homeland Security’s U.S. Customs

and Border Protection (CBP) has 

been unable to collect at least $480 

million in antidumping (AD) and 

countervailing (CV) duties. In July

2004, CBP revised its policy 

regarding the continuous bonds 

(CB) that importers post. The 

policy potentially significantly

increases the amount of the bonds 

for affected importers. Following 

the application of the policy to 

imports of shrimp as a “test case,”

U.S. importers and trading partners 

initiated legal action to prevent 

CBP from continuing to apply the 

policy. 

GAO examined why and how CBP 

revised its CB policy, how CBP 

implemented the revised policy,

and the effects of the revised 

policy. 

What GAO Recommends

GAO recommends that the 

Commissioner of CBP (1) conduct 

a formal review of the lessons CBP 

has learned from implementing the 

revised CB policy on shrimp 

imports and (2) develop clear and 

consistent guidance for 

implementing the policy and take

steps to inform covered importers 

of the basis upon which CBP will 

reduce importers’ bond 

requirement. The Department of

Homeland Security agreed with 

GAO’s recommendations and 

provided technical comments. The 

Department of Commerce also

provided technical comments. 

CBP revised its CB policy to reduce the risk of uncollected AD/CV duties. 

CBP determined that the traditional bond formula provides little protection 

of duty revenue. In addition, time lags and duty increases associated with 

the U.S. AD/CV duty system heighten the risk of importers’ bonds being 

insufficient, which led to large amounts of uncollected duties. 

CBP developed the revised CB policy internally, and then conducted some 

outreach prior to applying it to imports of shrimp as a “test case.” An 

internal CBP working group identified options for improving collection of 

AD/CV duties and recommended revising the CB policy. The revised policy 

significantly increased bond amounts for some shrimp importers. Before 

implementing the policy, CBP conducted outreach, but some importers 

criticized CBP’s outreach as insufficient. 

CBP’s implementation of the revised CB policy lacked transparency and 

consistency. CBP implemented the policy in February 2005 and required 

shrimp importers to obtain larger bonds. According to CBP, many importers 

inquired about lowering their bond requirement, and CBP lowered bond 

requirements under certain circumstances. However, CBP’s procedures for 

adjusting bond requirements were not formally written and were not public. 

GAO’s review of CBP and importer records showed that CBP set bond 

requirements on the basis of different data time periods for different 

importers and used inconsistent criteria when considering bond requests. 

The revised CB policy is expected and reported to have a variety of effects

on revenue protection, importers, and imports. CBP reports that the revised 

CB policy protects additional revenue, but the degree of success cannot be 

known yet. Importers report facing higher costs as a result of the revised 

policy, which they say leads them to change business practices and has 

reduced profitability. Trade data show that some import patterns shifted 

after the AD petition but before the revised CB policy was announced. 

Shrimp Imports from AD Countries Dropped after AD Petition Filed, but before

Announcement of Revised CB Policy 

Quantity (pounds in millions)

Source: GAO analysis of official trade statistics from the Department of Commerce, U.S. Census Bureau.

Year

AD petition

filed

AD orders

issued; Revised

CB policy

implemented

Revised CB

policy announced,

Preliminary AD 

determinations

2001 2002 2003 2006 2004 2005

0

20

40

60

80

100

120

AD countries Non-AD countries

Nov

Jan.

Mar.

May

.

S

Nov.

Jan.

Mar.

May

July

ept.

S

Nov

Jan.

Mar.

May

July

ept.

.

S

Nov.

Jan.

Mar.

May

July

ept.

S

Nov.

Jan.

Mar.

May

July

ept.

S

Jan.

Mar.

May

July

ept.

www.gao.gov/cgi-bin/getrpt?GAO-07-50.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Loren Yager at 

(202) 512-4347 or YagerL@gao.gov. 
Contents 

Letter 1

Summary 3

Conclusions 7

Recommendations for Executive Action 7 

Agency Comments and Our Evaluation 8 

Appendix I Briefing Slides from the October 10, 2006, Briefing 

to the House Committee on Ways and Means 9 

Appendix II Scope and Methodology 49 

Appendix III Comments from the Department of Commerce 51 

Appendix IV Comments from the Department of Homeland 

Security 52

GAO Comment 54 

Appendix V GAO Contact and Staff Acknowledgments 55 

Abbreviations 

AD antidumping 

CD continuous bond 

CV countervailing 

CBP U.S. Customs and Border Protection 

DDP delivered duty-paid 

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Page i GAO-07-50 CBP’s Revised Bonding Policy 
United States Government Accountability Office

Washington, DC 20548 

 

October 18, 2006 

The Honorable William M. Thomas 

Chairman 

Committee on Ways and Means 

House of Representatives 

Dear Mr. Chairman: 

Since 2003, the Department of Homeland Security’s U.S. Customs and 

Border Protection (CBP) has been unable to collect more than $480 

million in antidumping (AD) and countervailing (CV) duties, a problem we 

have previously blamed for undermining the effectiveness of U.S. trade 

remedies.1

 Congress has expressed ongoing concern about CBP’s 

problems in collecting AD/CV duties, most recently by enacting legislation

to close a legal loophole some believe contributed to a large amount of 

uncollected duties.2

 In an effort to address the underlying causes of its 

problem in collecting AD/CV duties, in July 2004, CBP revised its 

continuous bond (CB) policy. The policy significantly increases the 

amount of the bonds required for some affected importers.3 Following the 

application of the policy to imports of shrimp, U.S. importers and trading 

partners initiated legal action to prevent CBP from applying the policy.

CBP assesses importers’ estimated duties on goods brought into the 

United States on the basis of declarations by importers at the time that the

products enter the country. CBP then reviews the importer’s declarations 

and determines whether the importer’s estimates of import duties and fees 

were accurate or whether additional (supplemental) duties are owed. To 

help protect the government’s interests against loss if importers do not pay 

 1

CBP reported that it was unable to collect $130 million in AD/CV duties in fiscal year 2003,

$260 million in fiscal year 2004, and $93 million in fiscal year 2005. 

2

Section 1632 of Pub. L. No. 109-280 requires reports on collections problems, and

temporarily suspended the new shipper bonding privilege, which CBP and others said was

contributing to the problems CBP has experienced in collecting AD/CV duties. For a

description of the new shipper bonding privilege, see GAO, International Trade: Issues

and Effects of Implementing the Continued Dumping and Subsidy Offset Act, 

GAO-05-979 (Washington, D.C.: Sept. 26, 2005), 26, footnote 37. 

3

Currently, the revised CB policy is only being applied to imports of shrimp from six 

countries that are subject to antidumping orders: Brazil, China, Ecuador, India, Thailand, 

and Vietnam. 

Page 1 GAO-07-50 CBP’s Revised Bonding Policy 
the full amount of duties owed, CBP requires importers to maintain bond 

coverage. 

In addition to standard duties, some imports are subject to AD/CV duties 

to remedy the adverse impact of unfair trade practices, namely dumping 

(i.e., sales at less-than-normal value) and foreign government subsidies, on 

domestic industries and workers. Imposition of these duties requires two 

separate investigations by U.S. government agencies: one by the 

Department of Commerce, which determines if dumping or subsidies are 

occurring, and the other by the U.S. International Trade Commission, 

which determines whether a domestic U.S. industry is materially injured 

by such imports. If both agencies make affirmative determinations, CBP is 

directed to collect additional duties at a rate that Commerce determines. 

Given the importance of collecting AD/CV duties without unnecessarily 

burdening U.S. importers or international trade, we reviewed the 

development, implementation, and effects of CBP’s revised CB policy as 

applied to shrimp imports. Specifically, we reviewed (1) why CBP revised 

its continuous bond policy; (2) how CBP developed the revised policy; (3) 

how CBP has implemented the revised policy; and (4) the effects of the 

revised policy on revenue, imports, and importers. It was not our objective 

to assess or comment, nor should this report be construed as assessing or 

commenting, on the arguments raised in ongoing litigation relating to the 

revised CB policy. On October 10, 2006, we briefed your staff on the 

results of our analysis. This report formally conveys the information 

provided during the briefing (see app. I). 

To determine why and how CBP developed its revised CB policy, we 

reviewed the July 2004 revised policy and the related August 2005 policy

clarification. We also reviewed relevant laws and regulations and publicly

available documents that CBP submitted to the U.S. Court of International

Trade pursuant to ongoing litigation regarding the revised CB policy. In

addition, we interviewed CBP officials who participated in developing the 

revised policy. We did not independently verify the analysis CBP used to 

develop the revised CB policy. To identify how CBP implemented the 

revised policy, we reviewed publicly available documents that CBP 

submitted to the U.S. Court of International Trade pursuant to ongoing 

litigation, interviewed CBP officials responsible for implementing the 

policy, and reviewed selected documentation related to CBP’s decisions 

regarding setting individual companies’ bond amounts. We also 

interviewed and obtained documents from U.S. shrimp importers, which 

are the first and only importers subject to the revised policy, to obtain 

information on their experiences with CBP’s implementation of the policy.

Page 2 GAO-07-50 CBP’s Revised Bonding Policy 
To determine the effects of the revised CB policy, we reviewed economic 

literature and analysis. In addition, we interviewed industry 

representatives, surety companies and associations, and importers. Our 

interviews with 15 U.S. shrimp importers subject to the revised policy

included companies that were both large and small; that are party to and 

are not party to ongoing litigation regarding the revised policy; that 

imported shrimp from a variety of countries; and that ranged from almost 

exclusively relying on shrimp to having shrimp as one of many

commodities they import. We also spoke with several domestic producer 

interests. We conducted our work from April 2006 to September 2006 in 

accordance with generally accepted government auditing standards. (For 

additional details regarding our scope and methodology, see app. II.) 

In summary, we found the following in examining why and how CBP 

revised its CB policy, how CBP implemented the revised policy, and the 

effects of the revised policy: 

Summary 

• Why CBP revised the CB policy. CBP revised its CB policy to reduce three 

risks of uncollected AD/CV duties that it identified. First, the traditional 

bond formula provided little protection of duty revenue. It is set at the 

greater of $50,000 or 10 percent of an importer’s bill for duties and other 

CBP charges from the previous year, which often resulted in an 

insufficient bond. Second, multiple agencies are involved in a complex 

AD/CV duty investigation process,4

 final AD/CV duty bills are generated 

long after products enter the country,5

 and AD/CV duty rates on a product 

can increase dramatically. This often creates a need for CBP to go back to

importers to collect additional duties and a risk that CBP will not be able

to collect the full amount owed. In early 2004, CBP determined that the

 4

The AD/CV duty investigatory process includes Commerce’s investigation into whether

imports are being sold at unfairly low prices or benefit from subsidies and the U.S.

International Trade Commission’s investigation into whether such imports are causing or

are likely to cause injury to the domestic industry. 

5

Specifically, according to Commerce, after its preliminary determination, cash deposits

will be collected by CBP or bonds may be posted by the importer on entries of 

merchandise being investigated. After the investigation is complete and an order is issued 

(as a result of affirmative determinations by the U.S. International Trade Commission and 

Commerce), importers are required to pay cash deposits on entries—however, AD/CVD

duties are not assessed. AD/CVD duties are not assessed until after the conclusion of an 

administrative review by Commerce (unless no review is requested, in which case the 

entries are liquidated at the rate in effect at the time of entry). If, because of litigation, 

there is an injunction prohibiting liquidation following the publication of the final results of

administrative review, the injunction must lift before final AD/CVD duties are assessed. 

Page 3 GAO-07-50 CBP’s Revised Bonding Policy 
vast majority of outstanding duty bills were due to increases in AD/CV 

duty rates, and that insufficient bonds were the key reason CBP was 

unable to collect these duties when importers were unwilling or unable to 

pay. Third, CBP analyzed the uncollected AD/CV duties and determined 

that large portions were attributable to imports from China and to 

agriculture/aquaculture products. CBP then determined that importers of 

agriculture/aquaculture products shared certain characteristics, such as 

low capitalization, that made them a high risk for being unable to pay the 

full amount of AD/CV duties owed. 

• How CBP developed the revised CB policy. CBP developed a revised CB 

policy internally after factoring in several considerations and then 

conducted some outreach prior to applying the policy to shrimp importers. 

An internal CBP working group identified potential options for protecting 

future AD/CV duty revenue, and determined that revising the CB policy 

was the best mechanism to use because CBP concluded that the revision 

was within its legal authority and would be less burdensome on importers 

than other options. CBP decided that imports of warmwater shrimp, which 

were undergoing an AD investigation, would be a suitable test case for the 

revised bond policy, primarily because (1) warmwater shrimp shared 

characteristics with other agriculture/aquaculture products that indicated 

a risk that CBP may not be able to collect the full amount of duties owed; 

(2) it represented a large volume of imports and faced potentially high AD 

duties; and (3) shrimp imports were duty-free, therefore, most shrimp 

importers had no history of normal duty payments and had minimum 

$50,000 bonds. CBP’s goal was to balance its interest in ensuring that 

AD/CV duties were collected, with its interest of not imposing an 

“unnecessarily excessive burden on importers or international commerce.” 

However, while CBP analyzed possible bond premium increases that 

shrimp importers might incur, it did not consult with its own Customs 

Surety Executive Committee about the proposed policy. Moreover, CBP 

did not consider the additional collateral requirements that surety 

companies could impose to underwrite sizable increases in CB amounts in 

its analysis, in part because such business decisions reflect each surety’s 

own evaluation of risk. CBP then conducted outreach with certain 

agencies and groups, such as shrimp importers, before implementing the 

revised policy. However, certain importers have criticized CBP for, among 

other things, not providing adequate notice or soliciting formal public 

comments on the draft policy and for applying the policy to shrimp, where 

there was no demonstrated duty collection problem, but not to other 

cases—such as crawfish tail meat—where tens of millions of dollars in AD 

duties were uncollected.

Page 4 GAO-07-50 CBP’s Revised Bonding Policy 
• How CBP implemented the revised CB policy. CBP’s implementation of 

the revised CB policy lacked transparency and consistency. CBP 

implemented the policy in February 2005 by calculating the initial revised 

bond requirements for each shrimp importer using the company’s imports 

from the prior year, and by sending certain shrimp importers letters 

demanding that they post higher bond amounts within 30 days. Some 

importers complied with the CBP demand as written. Hundreds of other 

importers, however, requested lower bond amounts. Although CBP 

officials told us that initially these appeals were routinely denied, they

responded to importer calls for greater flexibility by developing internal, 

unwritten procedures and adjusting some bond amounts. In August 2005,

CBP publicly clarified the bond policy appeal procedures, but did not 

explain what evidence its officials would accept from importers to justify 

reducing bond amounts. Moreover, our interviews with CBP officials and

documentation we reviewed showed that how CBP defines the criteria it

considers in making bond adjustments is neither formally written down 

nor made publicly available and, in practice, is significantly narrower than 

the August 2005 policy clarification. In addition, CBP based bond 

requirements on different data time periods for different importers and 

rescinded some bond increases on the basis of 1 month of import data. 

CBP has identified additional products to which it might apply the revised

CB policy. However, CBP officials told us any decision to apply the revised 

policy to additional products, while supported by some U.S. producer 

interests, is on hold pending domestic and international legal challenges to

the policy. 

• Effects of the revised CB policy. Our analysis, interviews with importers,

and the limited data available show that the revised CB policy could be 

expected to have and is having a range of effects on revenue protection, 

shrimp imports, and importing firms. However, these effects cannot be 

isolated from the effects of other changes that occurred during the same 

time frame. Moreover, the small amount of time that has lapsed, 

Commerce’s ongoing review of AD rates for shrimp imports, and other 

factors make it premature to draw definitive conclusions. 

• CBP estimates indicate that more revenue is protected as a result of the 

new bond policy. Based on the value of actual bonds obtained after 

implementation of the revised policy, CBP reported in December 2005 

that the revised bond policy would ensure collection of revenue up to 

an increase of 85 percent in final AD duty rates, versus the traditional 

bond formula, which would only cover a 28 percent increase. While the 

revised CB policy protected additional revenue, CBP’s degree of 

success in protecting revenue will depend on a variety of factors. For 

example, the extent to which revenue will need to be protected will 

Page 5 GAO-07-50 CBP’s Revised Bonding Policy 
remain uncertain until final duty bills are determined and will be 

significantly affected by various factors, such as recent settlements 

between shrimp exporters and the domestic industry aimed at 

forestalling reviews by Commerce that could have changed duty rates. 

• In addition to the AD duties imposed, shrimp importers told us the 

costs associated with higher bond amounts are substantial. Importers 

now pay higher premiums and typically must also post the 100 percent 

collateral required by surety providers before the sureties will write the 

larger bonds. Importers with whom we spoke reported a range of 

effects arising from these higher costs on import flows, their sourcing 

patterns, and their business practices. Many importers emphasized that 

the collateral requirement is particularly onerous because it restricts 

the funds available to operate the business, and that this constraint 

results in lost or forgone business opportunities. 

• The concurrent imposition of AD duties and other factors affecting the 

shrimp industry limit the conclusions that can be drawn about the 

effects of the revised CB policy on imports. However, data we reviewed 

suggest that while the overall quantity and value of U.S. shrimp imports 

have not changed significantly since the AD petition (request to impose 

AD duties) was filed, the amount of shrimp imported from AD duty 

versus nonduty countries changed significantly, and the changes varied 

by country. These shifts in sourcing patterns began after the AD 

petition was filed but before the July 2004 announcement of the revised 

CB policy. Importers reported that the higher bonds and collateral 

requirements were negatively affecting many smaller shrimp importing 

businesses, causing them to stop importing or to exit the industry. The 

data we reviewed did not show substantial change in the number of 

shrimp importers since the AD petition was filed, but the data do 

suggest a recent trend toward the top-ranking importers’ gaining 

market share relative to the rest of the shrimp importing industry. The 

data also show declines in the number of shrimp exporters and gains in 

market share by the top-ranking exporters relative to the rest of the 

shrimp exporting industry. Moreover, some importers now require their 

foreign suppliers to ship on a delivered, duty-paid basis. This 

requirement makes the foreign-based supplier the U.S. importer of 

record and shifts the burden of higher bonds to them. CBP 

acknowledges that such importers without assets accessible to CBP 

represent a potential collection risk.

Page 6 GAO-07-50 CBP’s Revised Bonding Policy 
The revised CB policy significantly increased bond requirements for some 

importers, and some key lessons can be learned from CBP’s application of 

the policy to shrimp as its “test case.” Given concerns about the policy’s 

implementation and effects, recent legislation on other, related aspects of 

the collections problem, and the prospect of expanding the CB policy to 

other products, these lessons are timely and apply to both of CBP’s goals 

for the revised CB policy: protecting revenue and not placing an 

unnecessary burden on importers or international trade. Regarding 

revenue protection, the revised CB policy likely led to additional revenue

protection. However, an evaluation of the lessons learned in this area 

should consider the policy’s indirect effects on revenue and the unique 

circumstances present in this “test case.” Regarding not placing an 

unnecessary burden on importers or international trade, CBP’s outreach 

efforts during the development and implementation of the policy could

have been more effective. In addition, shrimp importers have expressed 

significant concerns regarding the onerous cost and other negative effects 

they attribute to the revised CB policy. 

Given the importance of the policy to CBP’s revenue collection efforts, the

policy’s reported effects on importers, and the scrutiny the policy has 

received, it is critical that the policy be applied in a transparent and 

consistent manner. The revised CB policy represented a significant change

from CBP’s traditional method of setting bond amounts. However, the 

importers we interviewed were often unclear about the basis upon which 

CBP would consider reducing companies’ bonds. CBP has not publicly 

explained a major part of the criteria it considers when adjusting bond 

amounts, which has contributed to a perception among some importers 

that the CB policy is being inconsistently implemented. Our review of CBP 

records confirmed this perception and showed that CBP lacks clear and 

transparent guidance for making bond adjustments, which led to 

inconsistent implementation. 

We are making two recommendations to the Commissioner of U.S. 

Customs and Border Protection. To ensure that CBP’s goal of ensuring 

collection of AD/CV duties without imposing an excessive burden on 

importers or international trade and commerce is achieved, the 

Commissioner of CBP should conduct a formal review of the lessons CBP 

can learn from implementing the revised CB policy on shrimp imports. 

Given CBP’s stated desire not to unnecessarily burden importers, this 

review should include specific steps to systematically obtain importers’ 

views on the policy. Moreover, the review should examine whether the 

policy appropriately addresses the underlying risks to CBP’s collection of 

Conclusions 

Recommendations for 

Executive Action 

Page 7 GAO-07-50 CBP’s Revised Bonding Policy 
AD/CV duties. To ensure full transparency and remedy inconsistent 

implementation of the CB policy, the Commissioner of CBP should 

develop clear and consistent guidance for implementing the policy, take 

steps to inform covered importers of the basis upon which CBP will 

reduce importers’ bond requirement, and ensure the guidance is uniformly 

applied. 

We provided a draft of this report to the Departments of Commerce, 

Homeland Security, and the Treasury and to the Office of the U.S. Trade 

Representative. Commerce provided comments, which are contained in 

appendix III, and additional technical comments, which we incorporated 

where appropriate. Homeland Security agreed with our recommendations 

and intends to take appropriate action to implement them. Its comments 

are contained in appendix IV. 

As agreed with your office, unless you publicly announce the contents of

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time we will send copies of this report to interested 

congressional committees, the Secretaries of Commerce and Homeland 

Security, the U.S. Trade Representative, and other interested parties. We 

will also make copies available to others upon request. In addition, the 

report will be available at no charge on GAO’s Web site at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-4347 or YagerL@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix V. 

Sincerely yours, 

Loren Yager

Director, International Affairs and Trade 

Agency Comments 

and Our Evaluation 

Page 8 GAO-07-50 CBP’s Revised Bonding Policy 
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 9 GAO-07-50 CBP’s Revised Bonding Policy 

Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

INTERNATIONAL TRADE: Customs’ Revised Bonding

Policy Reduces Risk of Uncollected Duties, but Concerns

about Uneven Implementation and Effects Remain

Briefing for the staff of the

House Committee on Ways and Means

October 10, 2006
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 10 GAO-07-50 CBP’s Revised Bonding Policy 

2

Background

• U.S. Customs and Border Protection (CBP) is responsible 

for collecting import duties; CBP collected more than $28 

billion in FY05 revenue

• Antidumping (AD) and countervailing (CV) duties are 

imposed to protect U.S. industry from unfair imports;1 from

FY03 through FY05, CBP collected $5.6 billion worth of 

such duties

• From FY03 through FY05, CBP reported to Congress that it 

had been unable to collect at least $480 million in AD/CV

duties

1Imports found to be dumped or subsidized that cause injury or threaten material

injury to U.S. industry.
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 11 GAO-07-50 CBP’s Revised Bonding Policy 

3

Background (continued)

• Importers are required to post bonds to help ensure that

duties (including AD/CV duties) are collected

• In July 2004, CBP revised its bonding policy, increasing the

amount of security that importers of certain

agriculture/aquaculture products subject to AD/CV duties

must provide in addition to cash deposits of estimated 

AD/CV duties

• Since applying the policy to shrimp imports, concerns 

about the revised continuous bond policy, its

implementation, and effects have been raised to Congress 

and the courts:

• Two separate legal cases have been filed in U.S. courts

• Two countries have requested formal dispute settlement

consultations within the World Trade Organization; one of them 

has now requested a panel be established to adjudicate the case
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 12 GAO-07-50 CBP’s Revised Bonding Policy 

4

Objectives

I. Why did CBP revise its continuous bond (CB) policy?

II. How did CBP develop the revised CB policy?

III. How has CBP implemented the revised CB policy?

IV. What are the effects of the revised CB policy on 

revenue, imports, and importers?
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 13 GAO-07-50 CBP’s Revised Bonding Policy 

5

Key Findings

• CBP Revised the CB Policy to Reduce Risk of Uncollected 

Duties

• CBP Developed Revised CB Policy Internally, Then

Conducted Some Outreach Prior to Implementation

• CBP’s Implementation of the Revised CB Policy Lacked

Transparency and Consistency

• Revised CB Policy Reported to Have a Variety of Effects; 

Some Import Patterns Shifted after AD Petition, but before 

Revised CB Policy Announced
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 14 GAO-07-50 CBP’s Revised Bonding Policy 

6

I. CBP Revised the CB Policy to 

Reduce Risk of Uncollected Duties

• I.1 Traditional Bond Formula Provides Little Protection of

Duty Revenue

• I.2 Time Lags and Potential Duty Increases Associated

with U.S. AD/CV Duty System Heighten Risk of Insufficient 

Bonds

• I.3 Insufficient Bonds Led to Large Amount of Uncollected 

Duties

• I.4 CBP Data Showed That One Country and Sector

Accounted for Most Uncollected AD/CV Duties
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 15 GAO-07-50 CBP’s Revised Bonding Policy 

7

I.1 Traditional Bond Formula Provides Little

Protection of Duty Revenue

• Importers pay estimated duties when products enter the 

United States

• To cover additional duties owed, importers frequently

provide a continuous bond equal to the greater of $50,000

or 10% of the duties, taxes, and fees paid the prior year

• In some cases, this bond amount does not sufficiently 

protect duty revenue if importers are unwilling or unable to

pay additional duties
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 16 GAO-07-50 CBP’s Revised Bonding Policy 

8

I.2 Time Lags and Potential Duty Increases Associated with

U.S. AD/CV Duty System Heighten Risk of Insufficient Bonds

• CBP cannot collect AD/CV duties until other agencies 

complete lengthy AD/CV investigations and administrative 

reviews

• Retrospective nature of U.S. AD/CV system involves risk of

uncollected duties: • AD/CV duties on given imports are often changed years later as a result of 

after-the-fact “administrative reviews” by Commerce

• If Commerce increases AD/CV duties, CBP issues “supplemental duty bills” for the additional amount and goes back to the importer to collect

• Significant increases in AD/CV duties can occur between 

the estimated rate at entry and the final rate: • In the cases that it examined, CBP determined that AD/CV duty rates

increased 33% of the time

• In some cases, the increase was more than double
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 17 GAO-07-50 CBP’s Revised Bonding Policy 

9

I.3 Insufficient Bonds Led to Large Amount of

Uncollected Duties

• Almost all delinquent duty bills in 2002 and 2003 were 

supplemental duty bills, which CBP linked to the AD/CV duty 

process

• CBP reported $130 million in uncollected AD/CV duties in 

2003

• Bonds were insufficient for 83% of the delinquent duty bills 

in the write-off process
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 18 GAO-07-50 CBP’s Revised Bonding Policy 

10

I.4 CBP Determined One Country and Sector 

Accounted for Most Uncollected AD/CV Duties

CBP analyzed the $130 million in uncollected AD/CV duty 

bills from 2003 and determined:

• Imports from China accounted for $104 million (80% of the total)

• Agriculture and aquaculture sector had the highest amount ($95 million, 

or 73% of the total); crawfish imports alone accounted for $85 million

CBP concluded that agriculture/aquaculture importers shared

certain high-risk characteristics:

• Low capitalization, many small firms 

• Highly leveraged, depend on borrowing

• Fluid market, many entrants and exits

• Most importers had 5 years or less in the industry
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 19 GAO-07-50 CBP’s Revised Bonding Policy 

11

Timeline of Development and Implementation of 

Revised CB Policy

Source: GAO analysis of CBP documents.

2003 2004 2005 2006

CBP begins computation 

of final duties for shrimp 

imports not subject to 

administrative review

CBP begins reviewing 

appeals

AD orders issued; 

CBP applies revised

bonding policy

to shrimp

Preliminary AD

determinations

for shrimp

CBP begins

developing bond

proposal 

Shrimp AD petition filed

CBP issues

policy

clarification

CBP informs

shrimp

importers of

revised bond

policy

CBP

announces

revised

bond policy

for

agriculture/

aquaculture

CBP reports

$130 million in

uncollected

AD/CV duties

for FY03
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 20 GAO-07-50 CBP’s Revised Bonding Policy 

12

II. CBP Developed Revised CB Policy Internally, Then

Conducted Some Outreach Prior to Implementation

• II.1 CBP Working Group Proposed Increasing the CB for

Shrimp Imports

• II.2 Revised CB Policy Significantly Increases Bond

Amounts for Some Importers

• II.3 CBP Conducted Some Outreach Prior to Implementation 

of the Revised CB Policy
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 21 GAO-07-50 CBP’s Revised Bonding Policy 

13

II.1 CBP Working Group Proposed Increasing

the CB for Shrimp Imports

An internal CBP working group identified potential options for 

addressing problems collecting AD/CV duties and chose to 

focus on the CB because:

• Setting the CB requirement is within CBP’s authority

• Increasing the CB would be less onerous on importers than other

options, such as holding merchandise or requiring single-entry

bonds

Early in the development of the revised CB policy, CBP 

targeted shrimp as a test case primarily because it:

• Was an aquaculture product undergoing an antidumping 

investigation 

• Represented a large value of imports (approximately $3 billion) 

• Proposed estimated dumping duties ranging from 26% to 349%

• Was duty-free, so had no history of normal duty payments

• 75% of shrimp importers had the minimum $50,000 CB
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 22 GAO-07-50 CBP’s Revised Bonding Policy 

14

II.1 CBP Working Group Proposed Increasing

the CB for Shrimp Imports (continued)

CBP’s stated goals for the policy were to:

• Ensure that AD/CV duties are collected (by protecting CBP up to a 

doubling of AD/CV duties)

• Not impose “unnecessarily excessive” burden on importers or

international trade and commerce

CBP analyzed potential costs to importers, such as bond

premium increases to obtain larger CBs, but:

• Did not consult its Customs Surety Executive Committee about the

proposed policy

• Did not consider the additional significant collateral requirements that 

sureties could impose to reflect business’ exposure
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 23 GAO-07-50 CBP’s Revised Bonding Policy 

15

II.2 Revised CB Policy Significantly Increases

Bond Amounts for Some Importers

• Announced in July 2004, the revised policy potentially

increases agriculture/aquaculture importers’ CB by an

amount equal to the duty rate set by Commerce times 

importer’s imports from the previous year.2

• For example, if an importer has imported 

agriculture/aquaculture merchandise subject to the 

antidumping case with a value of $1 million during the

previous 12 months, and the AD duty rate is 40%, the

importer’s CB amount will be increased by $400,000.

• Thus, if an importer previously had the minimum $50,000

bond, under the revised CB policy, it would need to post a 

bond 9 times the size of its previous bond ($400,000 +

$50,000 = $450,000)

2Shrimp was not specified. New importers’ requirement is based on the importer’s

estimate.
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 24 GAO-07-50 CBP’s Revised Bonding Policy 

16

II.3 CBP Conducted Some Outreach Prior to

Implementation of the Revised CB Policy

Before applying the requirements to shrimp, CBP took steps to inform other agencies and importers, including:

• Meeting with congressional staff and officials from Commerce

• Meeting with representatives of shrimp importers

• Sending explanatory letters to shrimp importers in December 2004

outlining the new bond formula and indicating importers might need to 

obtain larger bonds

Some importers have criticized CBP’s outreach because:

• CBP did not solicit formal public comments on the revised CB policy

• Some importers told us they were unaware the policy applied to them 

until CBP notified them that their bond was insufficient (the July 2004

policy and the December 2004 letter were broadly worded and did not 

specify that shrimp importers would be a covered case)

• CBP’s basis for choosing to apply the policy only to shrimp was not 

clear to shrimp importers
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 25 GAO-07-50 CBP’s Revised Bonding Policy 

17

III. CBP’s Implementation of the Revised CB

Policy Lacked Transparency and Consistency

• III.1 CBP Set Initial Bond Amounts on the Basis of Prior

Year’s Imports, and Some Importers Complied

• III.2 CBP Bond Adjustment Criteria Are Not Transparent or

Consistently Applied 

• III.3 CBP Monitors Bond Sufficiency and Considers Possible 

Future Covered Cases
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 26 GAO-07-50 CBP’s Revised Bonding Policy 

18

III.1 CBP Set Initial Bond Amounts on the Basis of Prior

Year’s Imports, and Some Importers Complied

In February 2005, CBP implemented its revised CB policy 

for importers of shrimp from six countries3 subject to AD

duties:

• CBP calculated revised bond amounts using the revised CB formula

by multiplying each shrimp importer’s imports for the previous 12

months by the applicable AD duty rate set by Commerce for each AD

country and exporter

• CBP officials told us they sent letters to about 200 importers with 

insufficient bonds, demanding that they post higher bonds within 30 

days:

• The letters referred importers to general bonding requirements, but did not specify whether or on what basis an importer could 

request that CBP lower the bond requirement

• According to CBP, most importers did not obtain bonds on the basis of 

this initial request

3These six countries are Brazil, China, Ecuador, India, Thailand, and Vietnam.
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 27 GAO-07-50 CBP’s Revised Bonding Policy 

19

III.2 CBP Bond Adjustment Criteria Are Not 

Transparent or Consistently Applied

CBP said it initially denied all appeals

Faced with calls to show flexibility, CBP made bond

adjustments for some of the numerous importers who 

inquired about lowering bond amounts

According to CBP officials, they reduced bond amounts in 

some cases, notably if:

• the initial calculation was incorrect or

• an importer shifted its sourcing patterns
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 28 GAO-07-50 CBP’s Revised Bonding Policy 

20

III.2 CBP Bond Adjustment Criteria Are Not 

Transparent or Consistently Applied (continued)

In August 2005, CBP issued a policy clarification that:

• Contained appeal procedures

• Specified factors CBP would consider in adjusting bond amounts 

including a likely reduction in an importer’s duty liability, but did not 

clearly explain how an importer could demonstrate this

• Identified the policy as potentially applying to all AD/CV cases

• Specified that only imports of shrimp were currently covered
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 29 GAO-07-50 CBP’s Revised Bonding Policy 

21

III.2 CBP Bond Adjustment Criteria Are Not 

Transparent or Consistently Applied (continued)

GAO’s review of selected CBP and importer records showed

that:

• How CBP defines the criteria it considers in making bond

adjustments are:

• Neither written nor public and

• significantly narrower than those listed in the August 2005 policy

clarification

• CBP set bonds on the basis of different data time periods 

for different importers:

• Following importer appeals, CBP rescinded some bond increases

based on as little as 1 month of import data
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 30 GAO-07-50 CBP’s Revised Bonding Policy 

22

III.3 CBP Monitors Bond Sufficiency and

Considers Possible Future Covered Cases

According to CBP officials, they monitor imports subject to

AD/CV duties to ensure importers’ bonds are sufficient:

• Importers are notified when a bond is “fully saturated”

• Some delays in posting bonds or import disruptions may occur

CBP officials considering applying the revised CB policy to 

other cases:

• Where problems collecting AD/CV duties were experienced

• Holding off pending resolution of legal challenges

• Some domestic producer interests support wider application
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 31 GAO-07-50 CBP’s Revised Bonding Policy 

23

IV. Revised CB Policy Reported to Have a Variety of

Effects; Some Import Patterns Shifted after AD 

Petition, but before Revised CB Policy Announced

• IV.1 Revised CB Policy Expected to Affect Revenue, 

Imports, and Importers

• IV.2 CBP and Importers Report Variety of Effects of Revised

CB Policy

• IV.3 Some Import Patterns Shifted after AD Petition, but 

before Revised CB Policy Announced
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 32 GAO-07-50 CBP’s Revised Bonding Policy 

24

IV.1 Revised CB Policy Expected to Affect

Revenue, Imports, and Importers

Effects of revised CB policy for shrimp imports cannot readily

be isolated from other changes occurring at the same time, 

such as the imposition of AD duties

Economic theory suggests that revised CB policy would:

• Reduce risk that CBP will not be able to collect AD/CV duty revenue

• Increase costs for importers

• Cause importers to change business practices

• Reduce imports from countries subject to AD/CV duties
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 33 GAO-07-50 CBP’s Revised Bonding Policy 

25

IV.2 CBP and Importers Report Variety of Effects 

of Revised CB Policy

Revenue 

CBP says revised CB policy protects additional revenue:

• CBP estimates that without the revised CB, bonds would have

covered an increase in the AD duty rate of up to 28%

• Following the revised CB policy, CBP received bonds equal to $146 

million, which covers an increase in the AD duty rate of up to 85%
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 34 GAO-07-50 CBP’s Revised Bonding Policy 

26

IV.2 CBP and Importers Report Variety of Effects 

of Revised CB Policy (continued)

Adequacy and appropriateness of the level of protection

provided by the revised CB policy, and the actual amount 

of revenue protected will depend on a variety of factors,

such as whether:

• The revised CB policy as implemented addresses the risks of 

Commerce increasing the AD duty rates on given exporters

• Degree of success in protecting revenue with the revised CB policy will 

not be known until final duty rates are set

• Exporters that made agreements with domestic shrimp producers

to be removed from the administrative review would have seen

their AD duty rates (and thus expected government revenue)

increase or decrease

• Importers shift to lower duty exporters

• Imports by importers without assets accessible to CBP (which CBP

sees as a potential collections risk) increase

• Exporters illegally circumvent AD duties
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 35 GAO-07-50 CBP’s Revised Bonding Policy 

27

IV.2 CBP and Importers Report Variety of Effects 

of Revised CB Policy (continued)

Importers Report Facing Higher Costs

• AD duties and higher bond premiums increase costs

• Sureties’ view many shrimp importers as a risk and now

require them to typically post 100% collateral, which causes

most significant negative effects by:

• Reducing the amount of funds available to operate the business

• Tying up collateral for several years

• Straining the borrowing capacity of some importers
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 36 GAO-07-50 CBP’s Revised Bonding Policy 

28

IV.2 CBP and Importers Report Variety of Effects 

of Revised CB Policy (continued)

Importers we interviewed report changing business practices,

such as:

• Adjusting purchasing amounts

• Altering sourcing patterns

• Losing or forgoing business opportunities

• Shifting risk to exporters by buying on a delivered duty paid (DDP) basis

Importers we interviewed report that increased costs reduce

profitability and impact market structure:

• Smaller importers having harder time competing

• Some importers exiting the industry

• Well-capitalized importers gaining market share

• Number of foreign importers of record increasing
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 37 GAO-07-50 CBP’s Revised Bonding Policy 

29

IV.3 Some Import Patterns Shifted after AD Petition, 

but before Revised CB Policy Announced

Since AD Petition Filed, Shrimp Import Quantities Level Off and 

Total Import Value Declines

Imports

0

200

400

600

800

1,000

1,200

1,400

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2001 2002 2003 2004 2005

Customs value (dollars in millions) Quantity (pounds in millions)

Source: GAO analysis of official trade statistics from the Department of Commerce, U.S. Census Bureau.

Year

Customs value

Quantity 

Before AD petition After AD petition
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 38 GAO-07-50 CBP’s Revised Bonding Policy 

30

IV.3 Some Import Patterns Shifted after AD Petition,

but before Revised CB Policy Announced (continued)

After Preliminary Shrimp AD Determination, “Implied” (Unit) Prices

Consistently Lower for AD Countries

Customs value per pound (in dollars)

Source: GAO analysis of official trade statistics from the Department of Commerce, U.S. Census Bureau.

Year

AD countries

Non-AD countries

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Q1 Q2 

 2006

Q1 Q2 Q3 Q4 

 2005

Q1 Q2 Q3 Q4 

 2004

Q1 Q2 Q3 Q4 

 2003

Q1 Q2 Q3 Q4 

 2002

Q1 Q2 Q3 Q4 

2001

AD petition filed

Average “Implied” (Unit) Price of Imported Shrimp (Customs value per pound)

AD orders issued;

Revised CB policy

implemented

Revised CB policy

announced,

Preliminary AD 

determinations
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 39 GAO-07-50 CBP’s Revised Bonding Policy 

31

Shrimp Imports from AD Countries Dropped Significantly after AD

Petition Filed, but before Announcement of Revised CB Policy

IV.3 Some Import Patterns Shifted after AD Petition,

but before Revised CB Policy Announced (continued)

Quantity (pounds in millions)

Source: GAO analysis of official trade statistics from the Department of Commerce, U.S. Census Bureau.

Year

AD petition filed

AD orders issued;

Revised CB

policy implemented

Revised CB policy

announced,

Preliminary AD 

determinations

0

20

40

60

80

100

120

AD countries

Non-AD countries

2001 2002 2003 2004 2005 2006

Oct.

Nov. Dec.

Jan. Feb.

Mar. Apr.

May

June

S

Au

ept.

g.

May

June

July

Apr. Mar.

Feb. Jan.

Dec. Nov.

Oct. S

Au

ept.

g.

May

June

July

Apr. Mar.

Feb. Jan.

Dec. Nov.

Oct. S

Au

ept.

g.

May

June

July

Apr. Mar.

Feb. Jan.

Dec. Nov.

Oct. S

Au

ept.

g.

May

June

July

Apr. Mar.

Feb. Jan.

Dec. Nov.

Oct. S

Au

ept.

g.

May

June

July

Apr. Mar.

Feb. Jan.
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 40 GAO-07-50 CBP’s Revised Bonding Policy 

32

IV.3 Some Import Patterns Shifted after AD Petition, 

but before Revised CB Policy Announced (continued)

AD Countries Overall Lose Market Share

Percentage of U.S. shrimp imports (quantity)

Source: GAO analysis of official trade statistics from the Department of Commerce, U.S. Census Burearu.

Year

0

10

20

30

40

50

60

70

80

90

100

Q1 Q2 

 2006

Q1 Q2 Q3 Q4 

 2005

Q1 Q2 Q3 Q4 

 2004

Q1 Q2 Q3 Q4 

 2003

Q1 Q2 Q3 Q4 

 2002

Q1 Q2 Q3 Q4 

 2001

AD petition filed

Revised CB policy 

announced

Preliminary AD

determinations

AD orders issued;

Revised CB

policy implemented

Non-AD countries

AD countries
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 41 GAO-07-50 CBP’s Revised Bonding Policy 

33

IV.3 Some Import Patterns Shifted after AD Petition, 

but before Revised CB Policy Announced (continued)

U.S. Shrimp Imports from Some Countries Shift Substantially

Percentage of U.S. shrimp imports (quantity)

Source: GAO analysis of official trade statistics from the Department of Commerce, U.S. Census Bureau.

Year

Thailand (subject to AD duties) 

China (subject to AD duties) 

Indonesia (not subject to AD duties)

0

5

10

15

20

25

30

35

40

Q1 Q2 

 2006

Q1 Q2 Q3 Q4 

 2005

Q1 Q2 Q3 Q4 

 2004

Q1 Q2 Q3 Q4 

 2003

Q1 Q2 Q3 Q4 

 2002

Q1 Q2 Q3 Q4 

 2001

AD petition filed

Revised CB

policy announced

Preliminary AD

determinations

AD orders issued; 

Revised CB policy 

implemented
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 42 GAO-07-50 CBP’s Revised Bonding Policy 

34

IV.3 Some Import Patterns Shifted after AD Petition, 

but before Revised CB Policy Announced (continued)

Largest Shrimp Importers Gain Market Share Recently

Cumulative Share of Total U.S. Shrimp Imports (Percentage of Quantity)

59.8

40.3

26.3

19.3

9.4%

553

2005

(through June)

54.3

37.9

25.9

19.4

8.9%

770

2005

(full year)

52.3

35.0

22.9

16.6

7.4%

772

2004

(full year)

53.0

36.8

24.7

18.0

8.4%

722

2003

(full year)

Top 100 

importers

Top 50 

importers

Top 25 

importers

Top 15 

importers

Top 5 

Importers

Total Number

of Shrimp

Importers

2006

(through June)

550

62.7

45.2

30.9

22.5

9.9%

Source: GAO analysis of CBP data.
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 43 GAO-07-50 CBP’s Revised Bonding Policy 

35

IV.3 Some Import Patterns Shifted after AD Petition, 

but before Revised CB Policy Announced (continued)

Cumulative Share of Total U.S. Shrimp Imports (Percentage of Quantity)

28.4

19.1

12.9

9.9

5.2%

2,162

2005

(full year)

38.5

26.9

18.3

14.0

6.2%

1,346

2006

(through

June)

Top 25 Exporters 9.6 11.8 16.2

Top 50 Exporters 14.7 17.5 24.1

Top 100 Exporters 22.2 25.9 34.5

Top 15 Exporters 6.7 8.9 12.0

Top 5 Exporters 3.1% 4.3% 6.0%

Total Number of 2,743 2,469 1,462

Shrimp Exporters

2005

(through 

June)

2004

(full year)

2003

(full year)

Number of Shrimp Exporters Declines; Largest Exporters Gain Market Share 

Source: GAO analysis of CBP data.
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 44 GAO-07-50 CBP’s Revised Bonding Policy 

36

Conclusions

Revised CB policy significantly increased bond requirements, 

and key lessons can be learned:

• Regarding CBP’s goal of revenue protection:

• Revised CB policy likely led to some protection of revenue

• Shrimp did not have history of uncollected duties, but exhibited

some characteristics that could make it a collections risk

• Indirect effects on revenue and unique case characteristics are 

important to consider

• Regarding CBP’s goal of avoiding unnecessary burden:

• Outreach to importers and other stakeholders could have been more

effective

• Importers have significant concerns regarding the higher cost and 

other negative effects on their business, which they attribute to the 

policy
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 45 GAO-07-50 CBP’s Revised Bonding Policy 

37

Conclusions (continued)

• Revised CB policy represented significant change from

prior policy, thus making clear communication and

preparation critical

• CBP lacks clear and transparent guidance for making bond 

adjustments

• Lack of clear and transparent guidance led to uneven

implementation
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 46 GAO-07-50 CBP’s Revised Bonding Policy 

38

Recommendations for Executive Action

We are making two recommendations to the Commissioner 

of U.S. Customs and Border Protection:

• To ensure that CBP’s goal of collecting AD/CV duties 

without imposing an excessive burden on importers or 

international trade and commerce is achieved, the 

Commissioner of CBP should conduct a formal review of 

the lessons CBP can learn from implementing the revised 

CB policy for shrimp imports. Given CBP’s stated desire

not to unnecessarily burden importers, this review should 

include specific steps to systematically obtain importers’ 

views on the policy. Moreover, the review should examine

whether the policy appropriately addresses the underlying 

risks to CBP’s collection of AD/CV duties.
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 47 GAO-07-50 CBP’s Revised Bonding Policy 

39

Recommendations for Executive Action (continued)

• To ensure full transparency and remedy inconsistent

implementation of the CB policy, the Commissioner of CBP 

should develop clear and consistent guidance for

implementing the policy, take steps to inform covered 

importers of the basis upon which CBP will reduce 

importers’ bond requirement, and ensure the guidance is 

uniformly applied. 
Appendix I: Briefing Slides from the October 

10, 2006, Briefing to the House Committee on 

Ways and Means 

Page 48 GAO-07-50 CBP’s Revised Bonding Policy 

40

Scope and Methodology

• To determine why and how CBP developed its revised continuous bond policy, we

reviewed the revised policy and the related August 2005 policy clarification. We also 

reviewed relevant laws and regulations and publicly available documents submitted by CBP to the U.S. Court of International Trade pursuant to ongoing litigation. In addition, we

interviewed CBP officials who participated in the development of the revised policy and the 

agencies they sought to involve in this process. We did not independently verify or 

evaluate CBP’s analysis used as the basis for developing the revised CB policy.

• To identify how CBP has implemented the revised policy, we reviewed publicly available 

documents submitted by CBP to the U.S. Court of International Trade pursuant to ongoing litigation and interviewed CBP officials responsible for implementing the policy. In

addition, we requested additional documents from CBP and reviewed correspondence

provided by CBP regarding its communication with shrimp importers concerning bond 

adjustments. We also interviewed and obtained documents from U.S. importers that are 

subject to the policy to obtain their experiences with CBP’s implementation of the policy. 

• To determine the effects of the revised CB policy, we reviewed economic literature and 

analysis regarding the expected effects of the policy. In addition, we interviewed industry

representatives, surety companies and associations, and importers. Our interviews with

15 importers subject to the revised policy included companies that were both large and 

small; were party to and were not party to ongoing litigation regarding the revised policy; imported shrimp from a variety of countries; and ranged from almost exclusively relying on 

shrimp to having shrimp as one of many commodities they import. We also obtained and 

analyzed publicly available official data on shrimp imports from the Department of

Commerce as well as additional data from CBP. The results of this analysis provided valid

insights, but cannot be considered definitive due to several limitations. We conducted our

work from April 2006 to September 2006 in accordance with generally accepted

government auditing standards.
Appendix II: Scope and Methodology 

Page 49 GAO-07-50 CBP’s Revised Bonding Policy 

Appendix II: Scope and Methodology 

To determine why and how the Department of Homeland Security’s U.S. 

Customs and Border Protection (CBP) revised its continuous bond (CB) 

policy, we reviewed the revised policy and the subsequent August 2005 

policy clarification. We also reviewed relevant laws, regulations, and legal 

precedents and interviewed officials at CBP, the Department of 

Commerce, and the Department of the Treasury. In addition, we reviewed 

publicly available documents that CBP submitted to the U.S. Court of 

International Trade pursuant to ongoing domestic litigation regarding the

revised CB policy. Furthermore, we interviewed CBP officials who 

participated in the development of the revised policy and the agencies they 

sought to involve in this process. We did not independently verify or 

evaluate CBP analyses used as the basis for developing the revised CB 

policy, because this matter is presently under litigation. 

To identify how CBP implemented the revised CB policy, we reviewed 

publicly available documents that CBP submitted to the U.S. Court of 

International Trade pursuant to ongoing domestic litigation and 

interviewed CBP officials responsible for implementing the policy. In 

addition, we requested and reviewed other documentation from CBP, 

including correspondence between CBP and 39 shrimp importers that CBP 

selected as representative examples of how they handled bond adjustment 

requests. We also obtained documentation of importer/CBP bond 

adjustment discussions from 5 shrimp importers. In addition, we also 

interviewed 15 U.S. companies that import shrimp (importers) that are 

subject to the policy, including those that sent us documentation of CBP 

communication, to obtain information on their experiences with CBP’s 

implementation of the policy. More details on how this sample of 15 

importers was selected are discussed later in this appendix. Lastly, given 

that antidumping (AD) and countervailing (CV) duties are imposed to 

remedy injury to domestic producers, we interviewed representatives of 

U.S. shrimp producers as well as representatives of producers in industries 

where CBP has experienced problems collecting AD/CV duties. 

To analyze the effects of the revised CB policy on duty collections, 

imports, and importers, we first reviewed relevant economic and related 

literature on tariffs and AD duties to determine the expected effects of CB

policy, which we used as a guide to the interpretation of importer 

interviews and our data analysis. We then gathered relevant information 

from shrimp industry officials, shrimp importers, and government reports 

to ascertain reported effects on importers and to examine U.S. shrimp 

importing trends. This information is factual in nature, but it does not 

represent a definitive determination of the effects associated with the 

revised CB policy, which would be premature at this time. While we 
Appendix II: Scope and Methodology 

consider the information presented relevant and instructive, it has known 

limitations resulting from such factors as the continued flux in important 

variables that could affect revenue and imports, such as Commerce’s AD 

duty rates; the difficulty in distinguishing the policy’s effect from other 

changes occurring at the same time (notably the imposition of AD duties); 

the short amount of time the policy has been in effect; and the limited 

availability of data. 

To examine the implications of the CB policy for revenue collection, we 

obtained CBP data regarding the amount of cash deposits obtained for 

shrimp imports and the amount of continuous bonds that CBP received 

since the policy was implemented. To examine the effects on imports and 

importers, we obtained and analyzed official U.S. trade statistics from the 

U.S. Census Bureau as well as additional data from CBP. We have done a 

detailed data reliability assessment for U.S. trade data on past 

engagements. On the basis of these reviews, we concluded that there are

no specific biases or limitations in these data that significantly impair their 

use, and that these data are sufficiently reliable to show the import trends

in shrimp products. 

To further examine the effects of the AD and bond policies on imports and 

importers, we interviewed shrimp industry representatives, surety 

companies and associations, and a selected group of U.S. shrimp 

importers. In selecting importers to interview, we judgmentally chose 

importers on the basis of their size and referrals from shrimp industry 

representatives and other shrimp importers. The importers we interviewed 

included companies that 

• were both large and small (annual shrimp imports ranged from a few 

million dollars to over $100 million); 

• were party to and were not party to ongoing litigation regarding the 

revised policy; 

• imported shrimp from a variety of countries; and

• ranged from almost exclusively relying on shrimp to having shrimp as one 

of many commodities they import. 

We conducted our work from April 2006 to September 2006 in accordance 

with generally accepted government auditing standards. 

Page 50 GAO-07-50 CBP’s Revised Bonding Policy 
Appendix III: Comments from the Department 

of Commerce 

Page 51 GAO-07-50 CBP’s Revised Bonding Policy 

Appendix III: Comments from the 

Department of Commerce 
Appendix IV: Comments from the Department 

of Homeland Security

Page 52 GAO-07-50 CBP’s Revised Bonding Policy 

Appendix IV: Comments from the 

Department of Homeland Security 

Note: GAO comment 

supplementing those in 

the report text appears at 

the end of this appendix. 
Appendix IV: Comments from the Department 

of Homeland Security

See GAO comment. 

Page 53 GAO-07-50 CBP’s Revised Bonding Policy 
Appendix IV: Comments from the Department 

of Homeland Security

The following is GAO’s comment on the Department of Homeland Security 

letter dated October 10, 2006. 

CBP’s publicly available August 2005 clarification listed seven factors that 

CBP would at least consider in adjusting bonds for individual importers. 

Our interviews with CBP officials and review of CBP records show that 

CBP (1) applied only one of the seven criteria, (2) applied a narrow 

interpretation of that criterion, and (3) was not transparent. 

GAO Comment 

Page 54 GAO-07-50 CBP’s Revised Bonding Policy 
Appendix V: 

A

GAO Contact and Staff 

cknowledgments 

Page 55 GAO-07-50 CBP’s Revised Bonding Policy 

Appendix V: GAO Contact and Staff 

Acknowledgments 

Loren Yager (202) 512-4347 

In addition to the individual named above, Kim Frankena (Assistant 

Director), Jason Bair, Ken Bombara, Grace Lui, and Don Morrison made 

key contributions to this report. Tim Wedding, Mark Speight, Martin de 

Alteriis, Casey Keplinger, Stephen Lawrence, and Christine San provided 

professional support and technical advice. Karen Deans and Jeremy 

Sebest provided editorial assistance and graphics support.

GAO Contact 

Staff 

Acknowledgments 

(320392) 
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