```

[Senate Hearing 112-355]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 112-355

  PROTECTING AMERICAN JOBS: STRENGTHENING TRADE ENFORCEMENT INCLUDING 
                     ANTI-DUMPING AND MARITIME LAWS
=======================================================================

                                HEARING

                                Before A

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            SPECIAL HEARING

                      MAY 25, 2011--WASHINGTON, DC

                               __________

         Printed for the use of the Committee on Appropriations

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                      COMMITTEE ON APPROPRIATIONS

                   DANIEL K. INOUYE, Hawaii, Chairman
PATRICK J. LEAHY, Vermont            THAD COCHRAN, Mississippi
TOM HARKIN, Iowa                     MITCH McCONNELL, Kentucky
BARBARA A. MIKULSKI, Maryland        RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin                 KAY BAILEY HUTCHISON, Texas
PATTY MURRAY, Washington             LAMAR ALEXANDER, Tennessee
DIANNE FEINSTEIN, California         SUSAN COLLINS, Maine
RICHARD J. DURBIN, Illinois          LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            LINDSEY GRAHAM, South Carolina
MARY L. LANDRIEU, Louisiana          MARK KIRK, Illinois
JACK REED, Rhode Island              DANIEL COATS, Indiana
FRANK R. LAUTENBERG, New Jersey      ROY BLUNT, Missouri
BEN NELSON, Nebraska                 JERRY MORAN, Kansas
MARK PRYOR, Arkansas                 JOHN HOEVEN, North Dakota
JON TESTER, Montana                  RON JOHNSON, Wisconsin
SHERROD BROWN, Ohio

                    Charles J. Houy, Staff Director
                  Bruce Evans, Minority Staff Director
                                 ------                                

          Subcommittee on the Department of Homeland Security

                 MARY L. LANDRIEU, Louisiana, Chairman
             FRANK R. LAUTENBERG, New Jersey, Vice Chairman
DANIEL K. INOUYE, Hawaii             DANIEL COATS, Indiana
PATRICK J. LEAHY, Vermont            THAD COCHRAN, Mississippi
PATTY MURRAY, Washington             RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  LISA MURKOWSKI, Alaska
                                     JERRY MORAN, Kansas

                           Professional Staff
                            Charles Kieffer
                              Chip Walgren
                              Scott Nance
                            Drenan E. Dudley
                       Rebecca Davies (Minority)
                        Carol Cribbs (Minority)

                         Administrative Support

                              Nora Martin
                      Courtney Stevens (Minority)
                            C O N T E N T S

                              ----------                              
                                                                   Page

Opening Statement of Senator Mary L. Landrieu....................     1
Statement of Senator Dan Coats...................................     3
Statement of Loren Yager, Director, International Affairs and 
  Trade, Government Accountability Office........................     5
Statistics on Uncollected Duties.................................     5
Opportunities To Improve Collections of Anti-dumping and 
  Countervailing Duties..........................................     6
Prepared Statement of Yoren Lager................................     7
Past Initiatives To Improve Anti-dumping and Countervailing Duty 
  Collection Have Made Little Progress...........................     8
Additional Options Exist for Improving Collection of Anti-dumping 
  and Countervailing Duties......................................    10
Statement of Allen Gina, Assistant Commissioner for International 
  Trade, Customs and Border Protection...........................    12
    Prepared Statement of........................................    13
Anti-dumping and Countervailing Duty Evasion.....................    14
A Layered Approach...............................................    15
New Approaches to Anti-dumping and Countervailing Duty 
  Enforcement....................................................    15
The Jones Act....................................................    16
Statement of J. Scott Ballman, Jr., Deputy Assistant Director, 
  National Intellectual Property Rights Coordination Center, 
  Immigration and Customs Enforcement............................    17
    Prepared Statement of........................................    19
ICE Enforcement Efforts..........................................    19
Anti-dumping and Countervailing Duties Program...................    19
Anti-dumping and Countervailing Duty Investigations..............    20
Statement of Ronald Lorentzen, Deputy Assistant Secretary for 
  Import Administration, Department of Commerce..................    21
    Prepared Statement of........................................    23
Resources Needs..................................................    28
International Trade Administration Staffing......................    31
New Shippers.....................................................    34
Jones Act Enforcement............................................    36
Jones Act Resources..............................................    37
Statement of Kristen M. Baumer, President, Paul Piazza & Son, 
  Inc., New Orleans, Louisiana...................................    38
    Prepared Statement of........................................    39
Statement of Eddy Hayes, Partner, Leake & Andersson, and 
  Professor, Trade Policy, Tulane Law School, New Orleans, 
  Louisiana......................................................    42
    Prepared Statement of........................................    43
Statement of Keith Busse, Chairman and CEO, Steel Dynamics, Inc., 
  Fort Wayne, Indiana............................................    46
    Prepared Statement of........................................    47
Statement of Jim Adams, President and CEO, Offshore Marine 
  Service Association, New Orleans, Louisiana....................    49
    Prepared Statement of........................................    50
Additional Committee Questions...................................    58
Questions Submitted to Loren Yager...............................    59
Questions Submitted by Senator Mary L. Landrieu..................    59
Under-Collection of Tariff Revenue...............................    59
Reasons in Defense of a Retrospective Trade System...............    59
Shrimp Test Case.................................................    60
Characteristics of a Good Anti-dumping System....................    61
Effective Communications.........................................    61
Bonding Requirements.............................................    62
Product Concentration............................................    62
Willful Circumvention............................................    63
Questions Submitted to Allen Gina................................    63
Questions Submitted by Senator Mary L. Landrieu..................    63
Collecting Duties on Shrimp......................................    63
Use of Fines Collected for Investigations........................    63
Transparency.....................................................    63
Louisiana Shrimp Industry........................................    65
New Shipper......................................................    67
Difficulty Collecting Duties.....................................    68
Verification Teams...............................................    69
Statute of Limitations...........................................    69
Sharing Information with Agencies................................    69
Deemed Liquidations..............................................    70
Faster Reaction to Industry Protests.............................    70
Human Capital and Planning.......................................    70
Bonding Requirements.............................................    71
Complaints of Jones Act Violations...............................    71
Notice of Arrival in the Outer Continental Shelf--Burdensome 
  Coast Guard Regulation.........................................    71
Cooperative Enforcement--CBP Failure To Assess Penalties for 
  Jones Act Violations...........................................    72
Product Concentration............................................    73
Willful Circumvention............................................    74
Time Lag.........................................................    74
Side Payments....................................................    75
Effective Communications.........................................    75
Question Submitted by Senator Frank R. Lautenberg................    75
Questions Submitted by Senator Daniel Coats......................    76
Anti-dumping and Countervailing Duties Enforcement...............    78
Length of Time Devoted to Reviews and Investigations.............    78
Uncollected Anti-dumping Duties..................................    79
Questions Submitted to J. Scott Ballman, Jr......................    80
Questions Submitted by Senator Mary L. Landrieu..................    80
Investigations and Access to Other Countries.....................    80
Investigative Effort.............................................    82
Product Concentration............................................    83
Willful Circumvention............................................    84
Time Lag.........................................................    84
Side Payments....................................................    85
Effective Communications.........................................    85
Question Submitted by Senator Frank R. Lautenberg................    85
Questions Submitted by Senator Daniel Coats......................    86
Intellectual Property Rights.....................................    87
Anti-dumping and Countervailing Duties Enforcement...............    88
Length of Time Devoted to Reviews and Investigations.............    89
Uncollected Anti-dumping Duties..................................    89
Questions Submitted to Ronald Lorentzen..........................    90
Questions Submitted by Senator Mary L. Landrieu..................    90
Chinese Circumvention............................................    90
Issuing Duty Orders..............................................    90
New Shippers.....................................................    91
Importance of Automated Commercial Environment...................    92
Time Lag.........................................................    92
Side Payments....................................................    92
Deemed Liquidations..............................................    93
Faster Reaction to Industry Protests.............................    93
Human Capital and Planning.......................................    93
Characteristics of a Good Anti-dumping System....................    94
Effective Communications.........................................    95
Product Concentration............................................    96
Willful Circumvention............................................    96
Questions Submitted by Senator Daniel Coats......................    96
Anti-dumping and Countervailing Duties Enforcement...............    96
Length of Time Devoted to Reviews and Investigations.............    97
Uncollected Anti-dumping Duties..................................    97
Questions Submitted to Eddy Hayes................................   100
Questions Submitted by Senator Mary L. Landrieu..................   100
Importance of Anti-dumping Duties................................   100
Require Cash Deposits............................................   101

  PROTECTING AMERICAN JOBS: STRENGTHENING TRADE ENFORCEMENT INCLUDING 
                     ANTI-DUMPING AND MARITIME LAWS

                              ----------                              

                        WEDNESDAY, MAY 25, 2011

                               U.S. Senate,
                 Subcommittee on Homeland Security,
                               Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:02 a.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Mary L. Landrieu (chairman) 
presiding.
    Present: Senators Landrieu and Coats.

             opening statement of senator mary l. landrieu

    Senator Landrieu. This meeting of the Homeland Security 
Subcommittee will come to order.
    I appreciate the witnesses joining us this morning, and our 
ranking member, Senator Coats, and others will be joining us 
momentarily. Let me begin with a brief opening statement.
    The Department of Homeland Security (DHS), as we all know, 
has many roles as it protects our country's security, including 
our economic security, which is sometimes in this Department 
overlooked. A critically underappreciated aspect of the 
Department's economic security role is enforcement of our 
Nation's trade laws.
    After the Internal Revenue Service (IRS), DHS is 
responsible for the next-largest source of revenue collection. 
I think that might come as a surprise to many. In fiscal year 
2009, U.S. companies imported more than $1.7 trillion in goods 
and deposited $22 billion in estimated duties into the U.S. 
Treasury.
    When the American people and the Congress think of the jobs 
performed by Customs and Border Protection (CBP) and 
Immigration and Customs Enforcement (ICE), they think of men 
and women on our borders with scopes, potentially rifles, 
enforcing our immigration laws. But CBP and ICE are also 
responsible for enforcing our trade laws, including anti-
dumping (AD) and maritime trade laws.
    Together, with the Department of Commerce (DOC), these 
agencies assess duties on imported goods, collect those duties, 
and ensure that goods entering the Nation's stream of commerce 
are safe, traded fairly and competitively. Unfortunately, many 
U.S. businesses and their employees are harmed when other 
countries and companies unfairly and illegally dump their goods 
on the U.S. market. Those actions, frequently deliberate, 
undercut the cost of products made in this country, thereby 
increasing the cost of production, reducing profits, and 
causing the loss of American jobs.
    I am concerned that CBP is simply not doing all they can to 
collect dumping duties that importers owe to the Federal 
Government. According to your own statistics, more than $1.5 
billion, including $1.04 billion in duties related to AD that 
accumulated between 2001 and 2010, have yet to be collected. We 
want to examine why this morning.
    Since 2005, for example, importers of shrimp from China 
have failed to pay more than $58 million in dumping duties, 
some of which is supposed to be redistributed to injured 
shrimpers, producers here in the United States, many of whom 
are in my State and in the region, of course, of the gulf 
coast.
    Continued failure to collect these duties is fiscally 
irresponsible, and it further threatens the vulnerability of 
our gulf seafood industry that is struggling mightily to 
recover from the impacts of not only four major hurricanes in 
recent years, but also the devastating oil spill of just over a 
year ago.
    The shrimp industry particularly has been a fundamental 
part of the Gulf of Mexico's culture for generations, 
particularly in south Louisiana. It is especially important to 
our State. In my State, we have at least 5,000 active 
shrimpers. Most of these are individuals, and it is more than 
just a job. It is an honored way of life, part of our culture.
    Our shrimping business spans generations with entire 
families working together, trawling, processing, and 
distributing what is arguably the best-tasting shrimp--if I 
have to say so myself--in the world. So, for hundreds of years, 
these families have made their homes and towns and villages 
along our coast and bayous. If this system breaks down, if this 
system doesn't work, if we fail to collect the duties and 
distribute them appropriately, this industry and this way of 
life suffer.
    Beyond its unique cultural significance, though, the 
Louisiana shrimp industry contributes more than $1 billion 
annually to our State's economy. But declining dock prices have 
been a trend for the past 2 decades, with prices falling 
precipitously since 1980.
    In March 2008, the Government Accountability Office (GAO) 
reported that as of September 2007, CBP had been unable to 
collect more than $600 million owed in AD and countervailing 
duties (CVDs) imposed to remedy this unfair competition. These 
include duties imposed on products exported to the United 
States at unfairly low prices, and duties on products exported 
to the United States that were subsidized by foreign 
governments. In addition to the substantial amount of lost 
revenue, the uncollected duties cause concern that the U.S. 
Government has not fully remedied these unfair trade practices.
    And I could go on and on about the shrimp industry, but it 
is not only the shrimp industry. Many, many industries are 
affected. Senator Coats's steel manufacturing industry is 
similarly affected, and we will be examining that in this 
hearing.
    In a separate trade issue, the Jones Act is designed to 
strengthen the economic and military security of our Nation by 
ensuring the existence of a robust merchant marine fleet. CBP 
is charged with enforcing our Nation's cabotage laws, including 
the Jones Act, which requires that any goods transported by 
water between two coast-wide points in the United States must 
be carried on ships that are built in America and crewed by 
Americans.
    According to a study prepared by PricewaterhouseCoopers for 
the National Transportation Institute, Louisiana ranks No. 1 in 
the Nation for jobs, economic output, labor compensation, and 
value added related to the domestic maritime industry. This 
industry is responsible in my State alone for almost 62,000 
jobs, with $3.4 billion a year in wages and an annual gross 
economic output of $14.25 billion.
    I could go on and on. This Jones Act is not just important 
to Louisiana, but to many, many States, particularly coastal 
States. Working with DOC, CBP and ICE are charged with 
enforcing these trade laws. As we will hear today, there are 
too many examples of these agencies, in my view, not 
aggressively doing the job they are charged to do.
    So I would like to examine if this is true, and if not, 
then what are the reasons that we are hearing so many of these 
complaints? And if it is, what can we do to potentially 
resource you better or streamline whatever regulations you are 
bumping into to get this job done?
    That is the purpose of this hearing. Our duty is to ensure 
that your agencies, funded by this subcommittee, are provided 
the resources needed to do an excellent job in this field to 
enforce our existing trade laws. It is important for our 
businesses. We are trying to grow jobs in America, not lose 
them.
    And we are trying to close a substantial budget gap. We 
don't want to leave $1 billion or $2 billion or $3 billion on 
the table when it can be collected and contribute to our effort 
and the great challenge that is before this Congress today.
    So these are some of the facts that we hope to bring 
forward. We are trying to understand whether the failure to 
collect AD duties is a result of the authorization, weak 
authorization law, which potentially needs to be strengthened, 
or is it a lack of resources to enforce the law? Or is it just 
a failure of the agencies to communicate, a deliberate lack of 
aggressiveness, or some combination of the above?
    We want to get to the bottom of this. I have had many, 
many, many complaints from my State from a broad variety, wide 
variety of industries.
    So I thank you all for coming. I want this to be productive 
and constructive. We want to be helpful to you as these 
challenges, I am sure, are mounting.
    So before we get to your opening remarks, I would like to 
turn to my ranking member, Senator Coats, for his opening 
statement. And thank you for joining me and for your interest 
in this subject, Senator.

                     statement of senator dan coats

    Senator Coats. Madam Chair, thank you. And thank you for 
having this hearing today.
    I think it is a good opportunity for me to make the 
acquaintance of individuals that I am happy to be working 
alongside of in the future. I am new to this Committee and new 
to the subcommittee, but I am privileged to be able to serve as 
ranking member on this subcommittee, along with Senator 
Landrieu.
    I want to assure you that those of us in Indiana don't have 
access to Indiana shrimp. So Louisiana is the highest priority 
in our shrimp orders. I am going to be asking from now on when 
I order shrimp at our restaurants whether it is Louisiana 
shrimp or not----
    Senator Landrieu. Make sure it is gulf shrimp.
    Senator Coats [continuing]. And make sure that it is.
    I would like to just tag on a little bit to what the 
chairwoman has said here regarding collection of duties on 
importation of goods. I don't need to remind everybody we are 
at a time of fiscal constraint and looking for ways in which to 
continue to do our jobs effectively and efficiently with 
perhaps less resources.
    And I have noticed how, and been personally engaged in 
helping support, additional revenues for our various police, 
sheriffs, and State trooper funds. I have noticed a very 
significant increase in the amount of cars pulled over to the 
side of the road, or tickets issued. They have met their fiscal 
challenge by making all of us safer drivers, including me.
    So I think collection of duties is one way we can help 
offset some of the potential declining revenues or static 
revenues we are seeing. So I encourage you to continue to think 
along these terms.
    My understanding is last fiscal year, 2010, CBP processed 
nearly $2 trillion in imports and collected more than $32 
billion in duties, taxes, and fees. In addition to ensuring the 
free flow of goods and people across our borders, CBP, ICE, and 
DOC enforce laws that ensure fair trade and fair competition.
    We do not want to encourage overly aggressive and 
unnecessary collection efforts, but by the same token, those 
that violate the laws need to be prosecuted. And collection of 
those fees is important. It sends a very important signal, I 
think, to those who are skirting the law that we are not going 
to tolerate that--that they do not have an easy path in terms 
of bringing their goods into this country illegally.
    Trade enforcement, whether it is AD orders, intellectual 
property rights, or safety of commercial merchandise, is 
vitally important to this country. Trade laws are especially 
important to my State of Indiana, where we have a number of 
steel, pipe, furniture, and other companies that rely on AD/
CVDs to protect against unfair imports.
    I am proud that a leading representative of the steel 
industry, Keith Busse from Steel Dynamics, is here today to 
stress the importance of enforcing these trade laws. And we 
will hear from him in the second panel.
    There are many of us who feel that each of your 
organizations should be doing more to enforce our trade laws. 
To give a sense of enforcement efforts in fiscal year 2010, 
CBP's Office of Laboratory and Scientific Services provided 
support in 977 shipments of products involved in AD cases and 
484 cases involving intellectual property rights.
    Since fiscal year 2006, ICE has initiated 391 cases based 
on allegations of fraud regarding AD orders. I hope that we 
will be able to discuss with all of our witnesses today how 
trade enforcement can be improved and what level of resources 
we should put toward these efforts, and I look forward to our 
discussion.
    Thank you, Madam Chair.
    Senator Landrieu. Thank you, Senator. I really appreciate 
your focus and interest.
    I would like to recognize our panel. In this order, ask 
them for their statements. Mr. Loren Yager from the Government 
Accountability Office; Mr. Allen Gina from Customs and Border 
Protection; Mr. Scott Ballman from Immigration and Customs 
Enforcement; and Mr. Ronald Lorentzen from the Department of 
Commerce.
    So, Mr. Yager, if you will begin? And I think we have asked 
you for 3 to 5 minutes?
    Thank you.
STATEMENT OF LOREN YAGER, DIRECTOR, INTERNATIONAL 
            AFFAIRS AND TRADE, GOVERNMENT 
            ACCOUNTABILITY OFFICE
    Mr. Yager. Madam Chair Landrieu, Ranking Member Coats, 
thank you for the opportunity to appear before the subcommittee 
to present our findings on the enforcement of AD/CVDs.
    Senator Landrieu. Could you pull the mike a little bit 
closer to you? It is a little difficult, but it moves. You can 
just--there you go.
    Mr. Yager. Okay. Madam Chair Landrieu, as you mentioned in 
your opening statement, the U.S. Government has not fully 
remedied the unfair trade practices for the U.S. industry and 
has also lost out on a substantial amount of duties that would 
have increased revenue to the U.S. Treasury.
    As you know, DOC is responsible for calculating the 
appropriate AD/CVD rate. CBP is responsible for collecting any 
additional duties, called liquidating. And ICE provides the 
investigative support for these and other enforcement issues 
related to the U.S. border.
    Madam Chair, my written statement summarizes the key 
efforts undertaken by CBP and DOC related to the issue of 
collection in recent years, efforts that have not solved the 
problem of significant lost revenues.
    In the past month, there have been hearings and also public 
events focused on the design of the system and whether the 
United States should consider a change to the current system 
that we have called a retrospective system. I am happy to 
answer any questions related to the design of this system.
    However, in my remarks today, let me focus on two aspects 
that are of more immediate relevance to this subcommittee, and 
these are related to getting the most effective use of the 
current resources--first, the need for better information and 
second, the need for better communication among the agencies to 
reduce the incidence of uncollected duties.

                    statistics on uncollected duties

    First, let me talk about the importance of better 
information. As we demonstrated in our 2008 report, there are a 
few key statistics that are central to understanding the issue.
    For example, GAO found in 2008 that uncollected duties were 
highly concentrated. Four products accounted for 84 percent of 
the uncollected duties. Importers purchasing from China 
accounted for 90 percent, and new shippers accounted for 40 
percent of those uncollected duties.
    Senator Landrieu. Could you state those again, please?
    Mr. Yager. Yes.
    Senator Landrieu. Four industries accounted for 80 percent?
    Mr. Yager. For 84 percent. Importers purchasing from China 
accounted for 90 percent, and new shippers, which is a 
particular category of shippers, which can be explained also by 
DOC and CBP, accounted for 40 percent of the uncollected 
duties.
    Senator Landrieu. Okay.
    Mr. Yager. This type of information helped the agencies, 
the Congress, and other stakeholders understand the nature of 
the problem and suggest ways to improve operations and to find 
solutions. However, from what we can gather, CBP and DOC have 
not updated most of these statistics since our 2008 report, and 
we believe they are missing an opportunity to utilize up-to-
date information to identify the key risks and reduce 
uncollected duties.

opportunities to improve collections of anti-dumping and countervailing 
                                 duties

    A second issue of particular interest to this panel is 
whether there are additional opportunities for the agencies 
represented here today to better communicate in ways that might 
make their individual efforts more effective. Let me give three 
examples.
    The first is eliminating what is called ``deemed 
liquidations''. These represent a failure in the system as an 
entry is deemed liquidated if CBP does not issue the 
liquidation order within 6 months of DOC's notice in the 
Federal Register. This means that the Treasury forfeits all 
revenue that might have been collected as a result of a review.
    Second is identifying the bad actors. We know from our 2008 
report that only 20 firms represented 63 percent of all 
uncollected duties. This suggests that early warnings are 
needed to prevent bills of that magnitude, and it appears 
collectively that the agencies have much of the necessary 
information, either from themselves or from the private sector.
    Whether this is ICE, who suspects that some firms may be 
owned by individuals who have avoided payment in the past; or 
it may be DOC, who might be aware that firms are importing 
large quantities on a minimal bond. And sharing that kind of 
information could prevent some of the largest bills from being 
created by firms who have no intention to pay.
    And finally, improving workforce planning. In a 
presentation last week, CBP made the point that they don't know 
what is likely to happen even the next day in terms of the 
volume of liquidation instructions that come from DOC. It could 
be a slow day, or it could be a massive day for them in terms 
of trying to get those liquidation instructions out.
    This has obvious implications for workforce planning and 
staffing and a major impact on the ability of the office to 
complete its work in an efficient manner. As a result, it is 
worth asking what kind of information DOC can legally provide 
to CBP in advance so that they can make appropriate decisions 
with regard to planning and ensuring that their work 
environment moves smoothly through their responsibilities.

                           prepared statement

    Madam Chair Landrieu, Ranking Member Coats, this concludes 
my statement. I would be happy to answer any questions that you 
have.
    [The prepared statement follows:]
                   Prepared Statement of Yoren Lager
    Chairman Landrieu, Ranking Member Coats, and members of the 
subcommittee: Thank you for the opportunity to appear before the 
subcommittee to present our findings on the enforcement of anti-dumping 
and countervailing duties (AD/CVDs). Since fiscal year 2001, the 
Federal Government has been unable to collect more than $1 billion in 
AD/CVDs imposed to remedy injurious, unfair foreign trade practices.\1\ 
These include AD duties imposed on products exported to the United 
States at unfairly low prices (i.e., dumped) and CVDs on products 
exported to the United States that were subsidized by foreign 
governments. These uncollected duties show that the U.S. Government has 
not fully remedied the unfair trade practices for U.S. industry and has 
lost out on a substantial amount of duties that would have increased 
revenue to the U.S. Treasury.
---------------------------------------------------------------------------
    \1\ In this testimony we use the phrase ``uncollected AD/CVDs'' to 
mean the sum of all open, unpaid bills for AD/CVDs, which includes 
those currently under protest. We include the principal amount of the 
bill, but not any accrued interest. This amount does not include 
revenue that is written off or forgone when the U.S. Government is 
unable to issue duty bills within statutory deadlines.
---------------------------------------------------------------------------
    In my statement today, I will summarize key findings from our prior 
reports on (1) past initiatives to improve AD/CVD collection and (2) 
additional options for improving AD/CVD collection. This statement is 
based on a body of work that we have conducted over the last several 
years for the Congress on issues related to the enforcement of U.S. 
trade laws, particularly a 2008 report on collection of AD/CVDs and a 
report, issued earlier this year, that included improved collection of 
AD/CVDs among opportunities for enhancing Government revenue.\2\ Since 
our 2008 report was issued, we have followed up with the U.S. 
Government agencies involved in responding to our recommendations to 
improve AD/CVD collection. We conducted our work in accordance with 
generally accepted Government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives.
---------------------------------------------------------------------------
    \2\ GAO, Antidumping and Countervailing Duties: Congress and 
Agencies Should Take Additional Steps to Reduce Substantial Shortfalls 
in Duty Collection, GAO-08-391 (Washington, DC: Mar. 26, 2008), and 
Opportunities to Reduce Potential Duplication in Government Programs, 
Save Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, DC: 
Mar. 1, 2011). See also International Trade: Customs' Revised Bonding 
Policy Reduces Risk of Uncollected Duties, but Concerns about Uneven 
Implementation and Effects Remain, GAO-07-50 (Washington, DC: Oct. 18, 
2006).
---------------------------------------------------------------------------
                               background
    The United States and many of its trading partners have established 
laws to remedy the unfair trade practices of other countries and 
foreign companies that cause injury to domestic industries. U.S. law 
authorizes the imposition of AD/CVDs to remedy these unfair trade 
practices, namely dumping (i.e., sales at less than normal value) and 
foreign government subsidies. The U.S. AD/CVD system is retrospective, 
in that importers pay estimated AD/CVDs at the time of importation, but 
the final amount of duties is not determined until later. By contrast, 
other major U.S. trading partners have AD/CVD systems that, although 
different from one another, are fundamentally prospective in that AD/
CVDs assessed at the time a product enters the country are essentially 
treated as final.
    Two key U.S. agencies are involved in assessing and collecting AD/
CVDs owed. The Department of Commerce (DOC) is responsible for 
calculating the appropriate AD/CVD rate, which it issues in an AD/CVD 
order.\3\ DOC typically determines two types of AD/CVD rates in the 
course of an initial AD/CVD investigation on a product: a rate 
applicable to a product associated with several specific manufacturers 
and exporters, as well as an ``all others'' rate for all other 
manufacturers and exporters of the product who were not individually 
investigated. After the initial AD/CVD investigation, DOC can often 
conduct two subsequent types of review: administrative and new shipper.
---------------------------------------------------------------------------
    \3\ Among other things, the order specifies the products for which 
importers must pay AD/CVDs.
---------------------------------------------------------------------------
Administrative Review
    One year after the initial rate is established, DOC can also 
conduct a review to determine the actual, rather than estimated, level 
of dumping or subsidization. At the conclusion of the administrative 
review, the final duty rate, also known as the liquidation rate, is 
established for the product.
New Shipper Review
    After an initial rate is established, a new shipper (i.e., a 
shipper who has not previously exported the product to the United 
States during the initial period of investigation and is not affiliated 
with any exporter who exported the subject merchandise) who is subject 
to the ``all others'' rate can request that DOC conduct a review to 
establish the shipper's own individual AD/CVD rate.
    U.S. Customs and Border Protection (CBP), part of the Department of 
Homeland Security (DHS), is responsible for collecting the AD/CVDs. The 
initial AD/CVD order issued by DOC instructs CBP to collect cash 
deposits at the time of importation on the products subject to the 
order. Once DOC establishes a final duty rate, it communicates the rate 
to CBP through liquidation instructions, and CBP instructs staff at 
each port of entry to assess final duties on all relevant products 
(technically called liquidating).\4\ This may result in providing 
importers--who are responsible for paying all duties, taxes, and fees 
on products brought into the United States--with a refund or sending an 
additional bill.
---------------------------------------------------------------------------
    \4\ 19 U.S.C. 1500. Legal authority over customs revenue functions 
is vested in the Secretary of the Treasury and, under Treasury Order 
165, was delegated to the U.S. Customs Service. In March 2003, the U.S. 
Customs Service was transferred to DHS, and authority over customs 
revenue functions was delegated to DHS. 68 Fed. Reg. 10777-01 (Mar. 6, 
2003).
---------------------------------------------------------------------------
    CBP is also responsible for setting the formula for establishing 
the bond amounts that importers must pay. To ensure payment of 
unforeseen obligations to the Government, all importers are required to 
post a security, usually a general obligation bond, when they import 
products into the United States.\5\ This bond is an insurance policy 
protecting the U.S. Government against revenue loss if an importer 
defaults on its financial obligations. In general, the importer is 
required to obtain a bond equal to 10 percent of the amount the 
importer was assessed in duties, taxes, and fees over the preceding 
year (or $50,000, whichever is greater). In addition, importers 
purchasing from the new shipper can pay estimated AD/CVDs by providing 
a bond in lieu of paying cash to cover the duties--an option known as 
the new shipper bonding privilege.
---------------------------------------------------------------------------
    \5\ 19 CFR 142.4.
---------------------------------------------------------------------------
    We previously reported that more than $613 million in AD/CVDs from 
fiscal years 2001 through 2007 went uncollected, with the uncollected 
duties highly concentrated among a few industries, products, countries 
of origin, and importers.\6\ Recent CBP data indicate that uncollected 
duties from fiscal year 2001 to 2010 have grown to more than $1 billion 
and are still highly concentrated. For example, according to CBP, five 
products from China account for 84 percent of uncollected duties.\7\
---------------------------------------------------------------------------
    \6\ GAO-08-391.
    \7\ The products are crawfish, fresh garlic, mushrooms, honey, and 
wooden bedroom furniture.
---------------------------------------------------------------------------
   past initiatives to improve anti-dumping and countervailing duty 
                  collection have made little progress
    CBP, the Congress, and DOC have undertaken several initiatives to 
address the problem of uncollected AD/CVDs. However, these initiatives 
have not resolved the problems associated with collections.
CBP Temporarily Adjusted Standard Bond-Setting Formulas
    In response to the problems of collecting AD/CVDs, in July 2004, 
CBP announced a revision to bonds covering certain imports subject to 
these duties, significantly increasing the value of bonds required of 
importers. CBP's goal was to increase protection for securing AD/CVD 
revenue for certain imports when the final amount of duties owed 
exceeds the amount paid at the time of importation, without imposing an 
``excessive burden'' on importers. In February 2005, CBP applied this 
revision to imports of shrimp from six countries as a test case, which 
covered a potential increase in the final AD duty rate of up to 85 
percent from the initial rate. However, shrimp importers reported that 
the costs were substantial because they had to pay up front higher 
premiums and larger collateral requirements to obtain the bonds for the 
initial duties.\8\ These increased up-front costs can deter malfeasance 
by illegitimate importers by increasing the cost of importing 
merchandise subject to AD/CVDs, but may also impose costs on legitimate 
importers that pose little risk of failing to pay retrospective AD/
CVDs. The enhanced bonding requirement was subject to domestic and 
World Trade Organization (WTO) litigation, and CBP decided to terminate 
the requirement in April 2009.\9\
---------------------------------------------------------------------------
    \8\ GAO-07-50 and GAO-08-391.
    \9\ In 2005, separate trade associations, whose membership includes 
some of the affected importers, filed two lawsuits against the United 
States challenging the bond policy. The Court of International Trade 
(CIT) dismissed one of the cases without a finding on the merits in 
2008. Seafood Exps. Ass'n of India v. United States, case No. 05-00347, 
court order of Feb. 19, 2008 (docket entry No. 54). In August 2009, CIT 
issued a decision on the second case and ordered the enhanced bonding 
policy be set aside as arbitrary, capricious, and otherwise not in 
accordance with law. National Fisheries Inst. v. United States, 673 F. 
Supp. 2d 1270 (Ct. Int'l Trade 2009). CIT remanded the bond amount 
determinations and found that although CBP possessed the authority to 
require bonds that take into account anti-dumping duties, it 
arbitrarily and capriciously imposed the new bond formula solely on 
U.S. importers of subject shrimp. Id. In October 2010, CIT issued a 
final judgment sustaining CBP's recalculation of the bond amounts using 
the pre-2004 bonding formula. National Fisheries Inst. v. United 
States, No. 05-00683, 2010 WL 4121855 (Ct. Int'l Trade Oct. 21, 2010). 
In addition, WTO's Appellate Body ruled in July 2008 that CBP's 
enhanced bonding requirement was inconsistent with U.S. obligations 
under international agreements. United States--Measures Relating to 
Shrimp from Thailand and United States--Customs Bond Directive for 
Merchandise Subject to Anti-Dumping/Countervailing Duties, WT/DS343/AB/
R and WT/DS345/AB/R.
---------------------------------------------------------------------------
The Congress Temporarily Suspended New Shipper Bonding Privilege
    The Congress partially addressed the risk that CBP would not be 
able to collect AD/CVDs from new shippers by suspending the new shipper 
bonding privilege from August 2006 to July 2009.\10\ As a result, 
importers purchasing from new shippers were required to post a cash 
deposit for estimated AD/CVDs, like all other importers. This 
requirement eliminated the risk of uncollected AD/CVD revenues when the 
final duty amounts were assessed at the cash deposit rate or less 
because CBP did not have to issue a bill for the bonded amount.\11\ 
Upon the July 2009 expiration of the requirement, the new shipper 
bonding privilege was reinstated. The Treasury stated in a 2008 report 
to the Congress that the added risk associated with the bond compared 
with the cash deposit is low.
---------------------------------------------------------------------------
    \10\ Pension Protection Act of 2006, Public Law No. 109-280, 
section 1632(a), 120 Stat. 780, 1165.
    \11\ This temporary requirement did not eliminate the risk of 
uncollected AD/CVDs in instances where the final duty rate amount 
exceeded the cash deposit amount.
---------------------------------------------------------------------------
Department of Commerce Continues Efforts To Improve Liquidation 
        Instructions
    DOC has taken steps to improve the transmission of liquidation 
instructions to CBP, which should improve CBP's ability to liquidate 
AD/CVDs in a timely manner. Once DOC determines the final AD/CVD, it 
publishes a notice in the Federal Register, and CBP has 6 months to 
complete the liquidation process.\12\ If CBP fails to complete the 
liquidation process within 6 months, an entry is ``deemed liquidated'' 
at the rate asserted by the importer at the time of entry.\13\ Once an 
entry has been deemed liquidated, CBP cannot attempt to collect any 
supplemental additional duties that might have been owed because of an 
increase in the AD/CVD rate from initial to final. DOC's liquidation 
instructions are necessary for CBP to assess and collect the 
appropriate amount of AD/CVDs in a timely manner. However, we reported 
in 2008 that there were frequent delays in DOC's transmission of 
liquidation instructions to CBP, and that about 80 percent of the time, 
DOC failed to send liquidation instructions within its self-imposed 15-
day deadline. In addition, we found that DOC's liquidation instructions 
were sometimes unclear, thereby causing CBP to take extra time to 
obtain clarification. In December 2007, after we made DOC officials 
aware of the untimely liquidation instructions, DOC announced a plan 
for tracking timeliness, including a quarterly reporting requirement. 
In April 2011, DOC officials told us that DOC had deployed a system for 
tracking DOC's liquidation instructions. In addition, DOC and CBP 
established a mechanism for CBP port personnel to submit questions to 
DOC regarding liquidation issues.
---------------------------------------------------------------------------
    \12\ 19 U.S.C. 1504(d).
    \13\ The importer must use reasonable care in making entry and, 
when filing electronically, certify that the information is true and 
correct to the best of his knowledge. 19 U.S.C. 1484.
---------------------------------------------------------------------------
Agencies Believe Using International Agreements To Collect Duties Would 
        Be Difficult and Ineffective
    The House and Senate Appropriations Committees directed us to 
examine whether international agreements to which the United States is 
a party could be strengthened to improve the collection of AD/CVDs from 
importers with no attachable assets in the United States. We reported 
in 2008 that U.S. agency officials believed this would be both 
difficult and ineffective because of two key obstacles: Few countries 
are willing to enter into negotiations, and United States and foreign 
governments have a practice of not enforcing a revenue claim based upon 
the revenue laws of another country.\14\ In addition, agency officials 
stated that strengthening international agreements would not 
substantially improve the collection of AD/CVDs, given the 
retrospective nature of the AD/CVD system and the high cost of 
litigation.
---------------------------------------------------------------------------
    \14\ GAO, Agencies Believe Strengthening International Agreements 
To Improve Collection of Antidumping and Countervailing Duties Would Be 
Difficult and Ineffective, GAO-08-876R (Washington, DC: July 24, 2008).
---------------------------------------------------------------------------
 additional options exist for improving collection of anti-dumping and 
                         countervailing duties
    There are two key components of the U.S. AD/CVD system that have 
not been addressed but could improve the collection of AD/CVDs: the 
retrospective nature of the system and the new shipper review process. 
In addition, DOC and CBP are contemplating changes to the bonding 
process.
Retrospective Nature of United States System Could Be Revised
    One key component of the U.S. AD/CVD system is its unique 
retrospective nature, which creates risks of uncollected duties both 
because of time lags and rate changes. As discussed earlier, importers 
pay the estimated amount of AD/CVDs when products enter the United 
States, but the final amount of duties owed is not determined until 
later. In 2008, we found that the average time elapsed between entry of 
goods and liquidation was more than 3 years. The long time lag between 
the initial entry of a product and the final assessment of duties 
heightens the risk that the Government will be unable to collect the 
full amount owed, as importers may disappear, cease business 
operations, or declare bankruptcy.
    The final amount owed under the retrospective system of the United 
States can also be substantially more than the original estimate, 
putting revenue at risk. We reported that, while final AD duty rates 
are lower than or the same as the estimated duty rates the vast 
majority of the time, in some cases final duty rates are significantly 
higher. On the basis of our analysis of more than 6 years of CBP data 
covering more than 900,000 entries subject to AD duties, we found that 
duty rates went up 16 percent of the time, went down 24 percent of the 
time, and remained the same 60 percent of the time.\15\ When duty rates 
increased, the median increase was less than 4 percentage points.\16\ 
However, because of some large increases, the average rate increase was 
62 percentage points, with some increases greater than 150 to 200 
percentage points. The majority of uncollected duty bills more than 
$500,000 are attributed to rate increases greater than 150 percentage 
points.
---------------------------------------------------------------------------
    \15\ For information on how we calculated these duty rate changes, 
see GAO-08-391.
    \16\ A median increase of 4 percentage points means that half of 
the time the rate increased less than 4 percentage points.
---------------------------------------------------------------------------
    In our 2008 report, we noted that the advantages and disadvantages 
of prospective and retrospective AD/CVD systems differ and depend on 
specific design features.
  --In prospective AD/CVD systems, the amount of AD/CVDs paid by the 
        importer at the time of importation is essentially treated as 
        final.\17\ This eliminates the risk of being unable to collect 
        AD/CVDs and creates certainty for importers. In a retrospective 
        AD/CVD system, however, the amount of AD/CVDs owed is not 
        determined until well after the time of importation. This time 
        lag can result in ``bad actors'', those importers who 
        intentionally avoid paying required duties, not being 
        identified until they have been importing for a long time. Only 
        after its collections efforts are unsuccessful does the 
        Government clearly know that duties owed by this importer are 
        at serious risk for noncollection.
---------------------------------------------------------------------------
    \17\ If and when the AD/CVD rate is changed under a prospective 
system, it is applied only to future imports and has no effect on the 
amount of duties owed for previous imports.
---------------------------------------------------------------------------
  --Prospective AD/CVD systems create a smaller burden for customs 
        officials because the full and final amount of AD/CVDs is 
        assessed at the time of importation, whereas, according to CBP, 
        the retrospective AD/CVD system of the United States places a 
        unique and significant burden on CBP's resources.
  --Depending on the design of the prospective AD/CVD systems, the 
        amount of duties assessed is based on dumping or subsidization 
        that occurred in a previous period, and therefore may not equal 
        the amount of actual dumping or subsidization, whereas under a 
        retrospective AD/CVD system, the amount of duties assessed 
        reflects the actual amount of dumping by the exporter for the 
        period of review. However, in practice, a substantial amount of 
        retrospective AD/CVD bills are not collected.
    In response to a recommendation in our 2008 report, DOC reported to 
the Congress in 2010 on the advantages and disadvantages of 
retrospective and prospective systems.\18\ While the DOC report cites a 
variety of strengths and weaknesses for both systems, it states that 
retroactive increases in AD/CVDs are particularly harmful for small 
businesses such as shrimp and seafood importers. Under a retrospective 
system, the DOC report notes, such small U.S. importers potentially 
face years of uncertainty over duty liability that can hinder their 
ability to make informed business decisions, plan investments, and 
create jobs.
---------------------------------------------------------------------------
    \18\ DOC, International Trade Administration, Relative Advantages 
and Disadvantages of Retrospective and Prospective Antidumping and 
Countervailing Duty Collection Systems: A Report to Congress. 
(Washington, DC: November 2010).
---------------------------------------------------------------------------
New Shipper Review Process Could Be Enhanced
    Another component of the AD/CVD collection system that has not been 
resolved is the new shipper review process. This process allows new 
manufacturers or exporters to petition for their own separate AD/CVD 
rate. However, U.S. law does not specify a minimum amount of exports or 
number of transactions that a company must make to be eligible for a 
new shipper review, and according to DOC officials, they do not have 
the legislative authority to create any such requirement. As a result, 
a shipper can be assigned an individual duty rate based on a minimal 
amount of exports--as little as one shipment, according to DOC--and can 
intentionally set a high price for this small amount of initial 
exports. This creates the possibility that companies may be able to get 
a low (or 0 percent) initial duty rate, which will subsequently rise 
when the exporter lowers its price. This creates additional risk by 
putting the Government in the position of having to collect additional 
duties in the future rather than at the time of importation. Importers 
that purchased goods from companies undergoing a new shipper review are 
responsible for approximately 40 percent of uncollected AD/CVDs.
The Department of Commerce and Customs and Border Protection Recently 
        Proposed Additional Changes to the Bonding Process
    DOC and CBP have proposed additional changes to the bonding process 
to try to reduce the risk of uncollected AD/CVDs. In April 2011, DOC 
proposed a rule that would eliminate the bond that all shippers post 
when entering products under an AD/CVD investigation and require a cash 
deposit instead.\19\ A key reason for the change is that importers bear 
full responsibility for future duties, according to DOC. Separately, in 
May 2011, CBP's Commissioner of International Trade stated in a Senate 
hearing that CBP is developing internal guidance to require that 
importers at risk of evasion take out one-time bonds that cover at 
least the full value of the shipment (single-transaction bonds). 
Currently, shippers typically take out a ``continuous bond'' that 
covers all import transactions over the course of a year, and is 
calculated at 10 percent of the prior year's duties (or $50,000, 
whichever is greater). GAO has not reviewed these proposals or assessed 
their potential effect on the collection of additional AD/CVDs.
---------------------------------------------------------------------------
    \19\ DOC regulations refer to this as a ``provisional measure''. 76 
Fed. Reg. 23225 (April 26, 2011).
---------------------------------------------------------------------------
                        concluding observations
    The existence of a substantial amount of uncollected AD/CVDs 
undermines the effectiveness of the U.S. Government's efforts to remedy 
unfair foreign trade practices for U.S. industry. While the Congress 
and Federal agencies have taken actions to address the problem of 
uncollected duties, these initiatives have met with little success. 
Some additional options exist that the Congress could pursue to further 
protect Government revenue. In particular, the Congress could eliminate 
the retrospective component of the U.S. AD/CVD system and consider the 
variety of alternative prospective systems available. The Congress 
could also make adjustments to specific aspects of the U.S. AD/CVD 
system without altering its retrospective nature, such as by providing 
DOC the discretion to require companies applying for a new shipper 
review to have a minimum amount or value of imports before establishing 
an individual AD/CVD rate. However, any effort to improve the U.S. AD/
CVD system should consider the additional costs placed on legitimate 
importers while attempting to address the issue of illegitimate 
importers. We continue to respond to congressional interest in this 
issue, and have recently begun a review of the evasion of trade duty 
laws, in response to a request from the Subcommittee on International 
Trade, Customs, and Global Competitiveness, Senate Committee on 
Finance.
    Chairman Landrieu, Ranking Member Coats, this completes my prepared 
statement. I would be happy to respond to any questions you or other 
members of the subcommittee may have at this time.

    Senator Landrieu. Thank you very much.
    We look forward to working closely with you, Mr. Yager.
    Mr. Gina.
STATEMENT OF ALLEN GINA, ASSISTANT COMMISSIONER FOR 
            INTERNATIONAL TRADE, CUSTOMS AND BORDER 
            PROTECTION
    Mr. Gina. Good morning.
    Madam Chair Landrieu, Ranking Member Coats, and members of 
the subcommittee, it is an honor to appear before you today to 
discuss CBP's responsibility to detect and prevent the evasion 
of AD/CVDs.
    Senator Landrieu. You have to pull your mike a little 
closer.
    Mr. Gina. Absolutely.
    Senator Landrieu. There you go.
    Mr. Gina. Thank you.
    My name is Al Gina, and I have been with CBP and its legacy 
agency, the U.S. Customs Service, for 29 years. While I am new 
to my role as assistant commissioner, Office of International 
Trade, I am committed to ensuring that the AD/CVD laws are 
enforced and that those who would try to evade those laws are 
identified and dealt with appropriately.
    In today's oral testimony, I will be highlighting the 
principal points set out in my previously submitted written 
statement.
    AD/CVD evasion is a significant challenge for the United 
States. And while we have had some successes, we realize that 
we must be more innovative and assertive to combat increasingly 
complex strategies used to evade AD/CVDs, which undermines the 
vitality of the U.S. industry and the integrity of our trade 
remedy laws.
    First, I would like to outline the challenges we see with 
evasion and dumping collection. We see multiple techniques used 
to evade, often used together in complex schemes. We see 
illegal transshipments, undervaluation, failure to manifest, 
misclassification, and other techniques, such as employing 
shell companies or the use of foreign businesses outside the 
reach of CBP's authorities.
    To address these threats, we use a layered approach by 
taking actions before and after goods enter the United States. 
Before goods arrive, CBP works with U.S. industry and foreign 
customs agencies to share information and assess risk of 
incoming shipments.
    Based on information received and risk assessments, we may 
sample goods to determine country of origin at time of entry. 
After entry, we perform verifications in order to further 
assess risk and determine if additional corrective actions 
should be taken.
    To track the valuable information that the private sector 
shares with us, we established CBP's e-Allegations online 
referral system in June 2008. We take each claim seriously, and 
we have researched 4,000 commercial allegations of which nearly 
10 percent are AD/CVD-related.
    CBP has also taken steps to specifically improve the 
collection of AD/CVDs on shrimp imports by requiring enhanced 
bonds. These efforts have been litigated in both the World 
Trade Organization (WTO), as well as the Court of International 
Trade. However, CBP continues to explore changes to enhance 
bonding requirements.
    Additionally, CBP works with the private sector and ICE by 
initiating enforcement operations. In the last 2 years, 10 AD/
CVD-focused operations have been conducted, resulting in 
successful cases on steel wire hangers, citric acid, mattress 
innerspring units, honey, furniture, tissue paper, lumber, 
catfish, and frozen shrimp.
    Also in the last 5 years, CBP has conducted 215 CVD/AD-
related audits and has recommended $42 million in recovery. 
However, CBP recognizes, as stated by Commissioner Bersin, that 
new methods of detection and deterrence are needed in this area 
of concern, and we look forward to continuing our work with 
DOC, ICE, GAO, industry, and this subcommittee to identify the 
most productive ways to deter dumping evasion and provide a 
level playing field.
    Some approaches, if I might mention, under consideration 
include the greater use of single-transaction bonds for 
importers when we suspect a risk to revenue. We will pursue 
regulatory and statutory changes to address the risk of 
nonpayment or evasion posed by nonresident importers of record.
    To trace the origin of goods imported using false 
documents, we need better information and verification of 
production capabilities in potential transshipment countries. 
Therefore, we are discussing how to secure new authority to 
conduct site visits in cooperation with host countries.
    We are working with DOC on the exchanging of information 
that will help us verify the legitimacy of goods and to tighten 
the new shipper requirements, which we see as a potential risk. 
And we are in discussion with others to develop task forces 
that would concentrate resources on the most complex criminal 
cases, just as we have done with intellectual property rights.

                           PREPARED STATEMENT

    Madam Chair Landrieu, members of the subcommittee, thank 
you again for the opportunity to testify today, and I look 
forward to working with you to address these issues. And I will 
be happy to answer your questions.
    Thank you.
    [The prepared statement follows:]
                    Prepared Statement of Allen Gina
                              introduction
    Chairman 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) trade enforcement role, 
specifically in detecting and preventing the circumvention of anti-
dumping and countervailing duties (AD/CVDs) on imported goods.
    My name is Al Gina, the Assistant Commissioner for CBP's Office of 
International Trade. I have been with CBP and its legacy agency, the 
U.S. Customs Service, for 29 years. While I am new to my role as 
Assistant Commissioner, Office of International Trade, I am very 
committed to ensuring that the AD/CVD laws are vigorously enforced and 
that those who would try to evade those laws are identified and dealt 
with appropriately. Thank you for this opportunity to appear here 
today.
    My testimony will highlight CBP's enforcement stance, provide 
examples of actions and initiatives performed in support of U.S. AD/CVD 
laws, and present some of the challenges we face while enforcing those 
important laws.
              anti-dumping and countervailing duty evasion
    CBP and U.S. producers have a common interest in preventing the 
evasion of AD/CVDs, which undermines the vitality of U.S. industry and 
the integrity of our trade remedy laws. We take all indications or 
allegations of evasion very seriously, and in coordination with U.S. 
Immigration and Customs Enforcement (ICE), employ all available methods 
in accordance with the law to address these matters. Recent publicized 
arrests and convictions by ICE and the Department of Justice (DOJ), 
with significant CBP assistance, are evidence of this. However, the 
increasing complexity of the strategies employed by parties to evade 
AD/CVDs poses a significant challenge.
    CBP has a statutory responsibility to collect all revenue due to 
the U.S. Government that arises from the importation of goods. In 
fiscal year 2010, CBP collected $310 million in AD/CVD deposits on $5.4 
billion of goods subject to AD/CVD orders. CBP's main challenge in all 
areas of trade enforcement, including AD/CVD enforcement, is to 
identify the small minority of noncompliant shipments amid the universe 
of compliant shipments.
    CBP's ability to fulfill its statutory responsibility to collect 
all revenue due to the U.S. Government that arises from the importation 
of goods has been affected by companies that willfully circumvent the 
provisions of the AD/CVD laws in order to avoid paying AD/CVDs. As 
evidenced by Senator Wyden's staff report on duty evasion, it is not 
difficult for an importer to find and collude with a producer to avoid 
paying dumping duties. Many of the parties identified in the Wyden 
report were able to hide their identity as part of the import 
transaction process.
    Evasion takes several forms and often involves the collusion of 
several parties, including the manufacturer, shippers, and the 
importer. Several schemes may be employed at once, further complicating 
an already challenging task:
  --Illegal transshipment involves the manipulation of documents and 
        shipping logistics to disguise the true country of origin of a 
        product. Transshipment is often built into production by 
        design, with false markings and packaging devised to 
        purposefully mimic legitimate production in other countries. 
        Determining a product's country of origin through visual 
        inspection or through verification of shipping documents can be 
        very difficult, especially if cargo has been manipulated prior 
        to import, completely masking the connection back to the true 
        source country.
  --Undervaluation involves the intentional 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/CVDs.
  --Misclassification includes improperly declaring goods with the 
        proper duty classification, or misdescribing 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.
  --Other schemes that exist include taking advantage of loopholes 
        related to administrative reviews, product engineering to fall 
        outside the scope of a case, employing shell companies as a 
        primary means of avoiding payment, or the use of foreign 
        businesses outside the reach of CBP authorities.
    Despite these challenges CBP, in partnership with ICE, has been 
increasingly successful in uncovering instances of illegal 
transshipment and penalizing those in the United States responsible for 
this fraud. Our recent enforcement activities include:
  --Special operations attacking illegal transshipment of Chinese steel 
        wire garment hangers through Vietnam, Korea, and Mexico, 
        concluding with the assessment of $13.1 million in AD/CVDs and 
        the arrests of two Mexican citizens.
  --An ongoing CBP/ICE operation on illegal transshipment of Chinese 
        citric acid resulting in the identification of $17 million in 
        unpaid AD/CVDs. Additional revenue recoveries are expected as 
        the operation continues.
  --A joint CBP/ICE operation on uncovered mattress innerspring units 
        from China that concluded with the assessment of $5.3 million 
        in unpaid AD/CVDs.
  --Using multiple investigative techniques including lab analysis, CBP 
        and ICE detected that Chinese honey had been transshipped 
        through Russia, India, Indonesia, Malaysia, Mongolia, the 
        Philippines, South Korea, Taiwan, and Thailand. This operation 
        has led so far to the indictment and arrest of multiple 
        corporate officers.
  --CBP recovered $2.5 million in unpaid AD duties through a company 
        audit on imports of frozen warm water shrimp transshipped from 
        China through Indonesia, where it was commingled with 
        Indonesian shrimp.
                           a layered approach
    CBP focuses its trade enforcement actions and resources around 
priority trade issues (PTI) that pose a significant risk to the U.S. 
economy, consumers, and stakeholders. In fiscal year 2003, AD/CVD 
enforcement was granted PTI status because of its importance to the 
U.S. economy.
    CBP utilizes a layered approach to trade facilitation and 
enforcement, which employs numerous efforts in the pre-entry, entry, 
and post-release environments to prevent, address, and deter AD/CVD 
violations and promote compliance.
    In the pre-entry environment, CBP works with U.S. industry and 
foreign customs agencies to share information prior to arrival, monitor 
the import process, verify compliance, and evaluate risk. At the 
border, CBP uses risk assessment to target and focus resources on high-
risk security, admissibility, and health and safety issues for further 
review, while working to expedite compliant trade across the border. In 
a post-release setting, verifications and audits are performed to 
ensure the process functions properly and to refine risk assessments 
based on outcomes. Throughout this process, CBP personnel work with 
agents from ICE and staff from the Department of Commerce (DOC), the 
administering authority for AD/CVD determinations under U.S. law, on 
potential enforcement action. This comprehensive approach is a dynamic 
response to the nature of today's international trade environment.
    We meet regularly with U.S. industry representatives to discuss AD/
CVD circumvention schemes, and U.S. industry representatives share 
valuable private sector intelligence with us. In order to facilitate 
the process of providing 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 4,000 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.
    When CBP suspects that AD/CVD circumvention violates criminal laws, 
we work closely with ICE to pursue these violations. ICE has certain 
authorities and resources, such as its global network of attaches, that 
complement CBP's own civil authorities and limited international 
capabilities to address AD/CVD circumvention. Last year ICE, working 
with a foreign government, assisted in that government's seizure of 
multiple containers of Chinese honey that had been destined for the 
United States.
    CBP carries out its AD/CVD enforcement by targeting AD/CVD 
circumvention at the national and port level. When targeting criteria 
alone cannot address all AD/CVD circumvention--it will not in many 
instances of transshipment--CBP will initiate an operation to 
coordinate actions across the country to determine if a violation is 
occurring and to determine its scope. In the last 2 years, 10 AD/CVD-
focused national operations and several local operations have been 
completed. Additionally, in the last 5 years, CBP has conducted 215 AD/
CVD-related audits and has recommended $42.2 million in recoveries to 
DOC.
   new approaches to anti-dumping and countervailing duty enforcement
    CBP is constantly developing new approaches to AD/CVD enforcement 
to meet the challenges posed by complex AD/CVD circumvention schemes. 
CBP is working with U.S. industry, ICE, and our international partners 
to develop new sources of information to identify AD/CVD circumvention. 
CBP also takes a comprehensive and integrated view of security and 
trade enforcement, and is creatively using other civil authorities to 
stop AD/CVD circumvention. We are exploring many options that will give 
us additional information and new tools to protect U.S. revenue and 
identify those who would use our system for illicit gains.
    As you know, under the current retrospective system, there can 
sometimes be substantial increases in AD/CVD rates several years after 
the initial finding by DOC. The bonding system is a key tool in our 
administration of the import process. We must pay particular attention 
to the risk of nonpayment or evasion posed by nonresident importers of 
record. For example, we can use our existing regulations to levy 
single-transaction bonds against any importer when we suspect a risk to 
revenue and I have directed my staff to develop internal guidance to 
ensure that single-transaction bonds are required whenever we suspect 
that a risk of revenue loss exists.
    CBP shares industry concerns about the importance of countering AD/
CVD circumvention. We also understand that U.S. industry wants more 
transparency in CBP's AD/CVD circumvention efforts. We are examining 
ways to timely release information to the public about our enforcement 
activities. At the same time, there is necessarily information that we 
cannot make public when there is a criminal case under development. 
Such cases usually require time to develop as CBP, in cooperation with 
ICE, fully investigates and prosecutes the parties that are not 
properly paying their AD/CVDs. Such public prosecution sends a very 
strong message worldwide about the U.S. Government's AD/CVD enforcement 
efforts. All of this notwithstanding, we are taking all necessary steps 
to find ways that will allow us to release information to petitioners 
to make our process more transparent.
    One of our biggest challenges, as I outlined earlier, is with 
transshipment where the normal documents available to us are not the 
complete set that would trace the goods back to the original country of 
origin. This was a problem we faced with textile transshipment and we 
found a good deal of success with textile production verification teams 
that, under the auspices of an agreement with the host country, would 
allow teams of CBP and ICE experts to determine the production 
capability of individual factories. CBP is looking at the possibility 
of conducting similar visits to ensure that goods are actually produced 
in the country claimed as the country of origin with our colleagues in 
the executive branch.
    Some of the activities we are undertaking are:
  --Working with DOJ to develop a task force to concentrate resources 
        on the most complex cases just as we have with intellectual 
        property rights;
  --Working with DOC on release of information that will help us verify 
        the legitimacy of goods suspected of transshipment and to 
        tighten the ``new shipper'' requirements; and
  --Clarifying the responsibility of customs brokers when executing 
        powers of attorney, to verify the both the identities of their 
        principals and their eligibility to be importers of record.
                             the jones act
    CBP also enforces many navigation and shipping laws intended to 
protect the U.S. maritime industry. One of these laws is the ``Jones 
Act'', which provides in part that a vessel may not provide any part of 
the transportation of merchandise by water, or by land and water, 
between points in the United States, either directly or via a foreign 
port, unless the vessel is wholly owned by citizens of the United 
States and has been issued a certificate of documentation with a 
coastwise endorsement by the U.S. Coast Guard or is exempt from 
documentation but would otherwise be eligible for such a certificate 
and endorsement.
    Transportation in this context occurs when there is a lading of 
merchandise at one U.S. point and an unlading of the same merchandise 
at a different U.S. point. Penalties are assessed for violations of the 
Jones Act, typically in the amount of the value of the merchandise 
illegally transported.
    CBP has a process whereby it issues rulings concerning the Jones 
Act and the other coastwise statutes. After issuance of its rulings, 
CBP publishes them in an electronic database where they can be reviewed 
by the public. CBP occasionally receives requests for waivers of the 
Jones Act, which are granted by the Secretary of Homeland Security if 
he/she determines that it is necessary in the interest of national 
defense and after consulting with the Maritime Administrator in the 
Department of Transportation, as to qualified U.S. vessel availability 
and receiving advice from the Departments of Defense and Energy about 
whether to grant the waiver. CBP Headquarters frequently interacts with 
and provides advice to its field offices concerning the enforcement of 
the Jones Act.
    In addition to focusing on strong enforcement of the Jones Act, CBP 
also conducts significant outreach to industry in order to increase 
compliance prevent violations of the Jones Act.
                               conclusion
    Senator Landrieu, members of the subcommittee, thank you again for 
the opportunity to testify today, I will be happy to answer your 
questions.

    Senator Landrieu. Thank you very much.
    Mr. Ballman.
STATEMENT OF J. SCOTT BALLMAN, JR., DEPUTY ASSISTANT 
            DIRECTOR, NATIONAL INTELLECTUAL PROPERTY 
            RIGHTS COORDINATION CENTER, IMMIGRATION AND 
            CUSTOMS ENFORCEMENT
    Mr. Ballman. Thank you.
    Madam Chair Landrieu, Ranking Member Coats, and 
distinguished members of the subcommittee, on behalf of 
Secretary Napolitano and Assistant Secretary Morton, it is my 
privilege to testify before you today to discuss the efforts of 
ICE Homeland Security Investigations (HSI) to combat illegal 
trade practices and investigate commercial fraud activities, 
including the evasion of AD/CVDs.
    As members of this subcommittee know, globalization 
provides boundless opportunities for commerce. But with these 
opportunities comes new potential threats to national security. 
DHS is committed to ensuring the security of America's borders 
while fostering and facilitating the movement of legitimate 
trade that is critical to our economy.
    ICE has a long history of engagement in commercial fraud 
enforcement, particularly AD/CVDs, dating back to our past as 
legacy U.S. Customs Service investigators. ICE works in close 
cooperation with relevant interagency partners, the private 
sector, and international counterparts to investigate a broad 
spectrum of crimes related to commercial fraud. ICE targets and 
investigates goods entering the United States illegally through 
our ports and seizes these goods for forfeiture.
    ICE recognizes that we must partner with the private sector 
to obtain the necessary information to halt this illegal 
fraudulent trade practice. It is also essential that we 
continue to work with all relevant Federal agencies to confront 
this challenge. ICE has, therefore, built strong relationships 
with our interagency partners and international counterparts.
    The ICE HSI commercial fraud priorities are, one, protect 
the health and safety of consumers, Government workers, and our 
warfighters from hazardous, tainted, substandard, and 
counterfeit imported products; two, protect U.S. businesses 
from unfair trade practices; and three, protect the revenue of 
the Federal Government.
    Our AD/CVDs program is one way that ICE protects U.S. 
businesses. ICE is responsible for investigating importers who 
evade the payment of dumping duties on imported merchandise. AD 
cases are long-term transnational investigations that require 
significant coordination between domestic and international 
offices and with our foreign law enforcement counterparts.
    When working dumping investigations, ICE agents work 
closely with CBP officers, import specialists, and regulatory 
auditors. Prior to opening a criminal case, ICE must verify the 
information related to dumping allegations made either by CBP 
or private industry. ICE agents research, identify, and obtain 
entry documents for all the alleged violator's importations to 
calculate a loss of revenue to the United States and to 
demonstrate that that loss of revenue exceeds prosecution 
thresholds set by the local United States attorney's office.
    Even if the initial calculation exceeds the minimum 
prosecution threshold, it is important to note that preliminary 
dumping duty rates are only estimates. The final rate is set by 
DOC, and the final rate could be substantially lower than the 
initial estimate. For example, ICE had to close multiple 
Canadian softwood lumber investigations when the dumping duty 
rate was lowered to zero by DOC officials.
    After demonstrating a loss of revenue that exceeds the 
threshold for prosecution, ICE will utilize mutual legal 
assistance treaties to obtain shipping records and other 
documents from foreign countries in order to prove that an 
individual or company evaded dumping duties through 
transshipment, undervaluation, overvaluation, or 
misdescription. This process normally involves coordination 
between several United States and foreign government agencies.
    Since 2006, ICE has initiated 391 cases based on 
allegations of fraud relating to AD/CVD orders, which, to date, 
have resulted in 28 criminal arrests, 86 indictments, and 39 
convictions.
    Current dumping orders affect products that Americans use 
on a daily basis. Of these, ICE has investigated a wide range 
of commodities, including honey, saccharin, citric acid, lined 
paper products, pasta, polyurethane bags, shrimp, catfish, 
crawfish, garlic, mushrooms, steel, magnesium, pencils, wooden 
bedroom furniture, wire clothing hangers, ball bearings, and 
nails.
    I would like to provide two examples of significant dumping 
investigations. In February 2008, ICE's special agent in charge 
(SAC) office in Chicago and the Food and Drug Administration 
(FDA) Office of Criminal Investigation began investigating 
Alfred L. Wolff, Inc., for the transshipment of Chinese honey 
to evade paying 221-percent AD duties.
    YongXiang Yan, a Chinese manufacturer of honey and the 
president and chairman of the board of Changge City Jixiang Bee 
Product Company, Limited, supplied Alfred L. Wolff with Chinese 
honey that was transshipped through the Philippines before 
entering the United States. To date, this investigation has led 
to 14 indictments of 11 individuals and five companies and a 
forfeiture provision for approximately $78 million in evaded 
dumping duties, an additional $39.5 million in undervaluation.
    In addition, five individuals have been arrested, two of 
whom have pled guilty and have been sentenced. Hung Ta Fan, the 
owner of four companies in the United States that were used to 
fraudulently import the honey from China, was sentenced to 30 
months in prison and fined $5 million. And Yan was sentenced to 
18 months and was fined $3 million.
    In February 2007, ICE agents in Atlanta received an 
allegation from CBP import specialists that Goshen Trading was 
submitting fraudulent documents to CBP to evade the payment of 
AD duties on wooden bedroom furniture from China. The goods 
were allegedly being intentionally misclassified as ``other'' 
or ``dining furniture'' from China.
    On April 10, 2007, ICE SAC Atlanta agents executed Federal 
search warrants at two Goshen business locations and at the 
residence of Goshen's owner, Seng Ng, which resulted in the 
seizure of 27 boxes of documents and eight computers. 
Subsequent analysis of the seized documents and computers 
identified evidence substantiating that Goshen knowingly and 
willfully submitted fraudulent documents to CBP on at least 185 
separate importations of Chinese wooden bedroom furniture.
    On May 13, 2009, Ng pled guilty to 18 U.S.C. 542, entry of 
goods by means of false statements or invoices, and on July 27, 
2009, Ng was sentenced to 14 months in prison and ordered to 
forfeit $5,993,433.70 to the United States in restitution.
    It is important to note that ICE criminal investigations 
are the last line of defense against evasion of AD/CVDs. By the 
time ICE investigators have become involved in a particular 
case, the alleged violators have already committed customs 
fraud by evading or by attempting to evade dumping duties.
    To act as a more efficient deterrent factor and protect 
U.S. business interests in global economy, the United States 
Government must increase its efforts to educate the public and 
foreign industry about the penalties and consequences for 
evading AD duties through our successful investigations and 
enforcement actions.

                           PREPARED STATEMENT

    Thank you once again for the opportunity to appear before 
you today to discuss the important role ICE plays in combating 
illegal trade practices, commercial fraud activities, and 
enforcing AD/CVDs.
    I would be pleased to answer any questions that you may 
have.
    [The prepared statement follows:]
              Prepared Statement of J. Scott Ballman, Jr.
                              introduction
    Chairman Landrieu, Ranking Member Coats, and distinguished members 
of the subcommittee: On behalf of Secretary Napolitano and Assistant 
Secretary Morton, it is my privilege to testify before you today to 
discuss the efforts of U.S. Immigration and Customs Enforcement (ICE), 
Homeland Security Investigations (HSI) to combat illegal trade 
practices and investigate commercial fraud activities, including the 
evasion of anti-dumping and countervailing duties (AD/CVDs). As members 
of this subcommittee know, globalization provides boundless 
opportunities for commerce, but with these opportunities comes new 
potential threats to national security. The Department of Homeland 
Security (DHS) is committed to ensuring the security of America's 
borders while fostering and facilitating the movement of legitimate 
trade that is critical to our economy.
                        ice enforcement efforts
    ICE has a long history of engagement in commercial fraud 
enforcement, particularly AD/CVD, dating back to our past as legacy 
U.S. Customs Service investigators. ICE works in close cooperation with 
relevant interagency partners, the private sector, and international 
counterparts to investigate a broad spectrum of crimes related to 
commercial fraud. ICE targets and investigates goods entering the 
United States illegally through our ports and seizes these goods for 
forfeiture. ICE recognizes that we must partner with the private sector 
to obtain the necessary information to halt this illegal fraudulent 
trade practice. It also is essential that we continue to work with all 
relevant Federal agencies to confront this challenge. ICE has, 
therefore, built strong relationships with our interagency partners and 
international counterparts.
             anti-dumping and countervailing duties program
    The ICE HSI Anti-Dumping and Countervailing Duties (AD/CVD) Program 
is one way that ICE protects U.S. businesses from fraudulent trade 
practices. AD/CVD orders are issued by the Department of Commerce (DOC) 
and collected and distributed by CBP. AD duties are assessed when 
importers sell merchandise at less than fair market value, which causes 
material injury to a domestic industry producing a comparable product. 
The United States can also impose CVDs to offset foreign government 
subsidy payments on exports of foreign businesses. Duties are imposed 
to offset the dumping or subsidies provided by the foreign country in 
order to maintain the competitiveness of United States industry and to 
foster a level playing field for businesses.
    ICE is responsible for investigating importers who evade the 
payment of AD/CVD on imported merchandise. AD/CVD cases are long-term, 
transnational investigations that require significant coordination 
between domestic and international offices and with our foreign law 
enforcement counterparts. When working AD/CVD investigations, ICE 
special agents also work closely with CBP officers, import specialists, 
and regulatory auditors.
    Prior to opening a criminal case, ICE must verify the information 
related to dumping allegations made either by CBP or private industry. 
ICE agents research, identify and obtain entry documents for all of the 
alleged violator's importations to calculate a loss of revenue to the 
United States and to demonstrate that the loss of revenue exceeds the 
prosecution threshold set by the local United States Attorney's Office. 
Even if the initial calculation exceeds the minimum prosecution 
threshold, it is important to note that preliminary dumping duty rates 
are only estimates. The final rate is set by DOC, and the final rate 
can be substantially lower than the initial estimate. For example, ICE 
had to close multiple Canadian softwood lumber investigations when the 
dumping duty rate was lowered to zero by DOC officials.
    After demonstrating a loss of revenue that exceeds the threshold 
for prosecution, ICE will utilize Mutual Legal Assistance Treaties 
(MLATs) to obtain shipping records and other documents from foreign 
countries in order to prove that an individual or company evaded 
dumping duties through transshipment, undervaluation or overvaluation, 
or misdescription. This process normally involves coordination between 
several United States and foreign government agencies.
          anti-dumping and countervailing duty investigations
    Since 2006, ICE has initiated 391 cases based on allegations of 
fraud regarding AD/CVD orders, which to date have resulted in 28 
criminal arrests, 86 indictments, and 39 convictions. Current AD/CVD 
orders affect products that Americans use on a daily basis. Of these, 
ICE has investigated a wide range of commodities including honey, 
saccharin, citric acid, lined paper products, pasta, polyethylene bags, 
shrimp, catfish, crayfish, garlic, steel, magnesium, pencils, wooden 
bedroom furniture, wire clothing hangers, ball bearings, and nails. I 
would now like to provide a few examples of significant AD/CVD 
investigations.
    In April 2005, HSI special agent in charge (SAC) Buffalo personnel 
began investigating three individuals and two companies for importing 
disguised, mislabeled, and undervalued Chinese magnesium powder to 
circumvent a 305.56 percent AD duty. The magnesium powder was disguised 
by physically placing aluminum nuggets on top of the magnesium powder 
and claiming it was a blend of magnesium and aluminum powders. After 
arrival in the United States the aluminum nuggets were removed from the 
magnesium powder.
    The three individuals and two businesses allegedly conspired to 
defraud the Department of Defense (DOD) by using this imported Chinese 
magnesium powder to manufacture countermeasure flares designed to draw 
heat seeking missiles away from fighter aircraft, in violation of the 
Buy America Contract, which requires that the magnesium must be a 
product of the United States.
    DOD was sold 1.8 million fraudulent and untested countermeasure 
flares for approximately $42 million. The Chinese magnesium used in the 
manufacture of the countermeasure flares was substandard and DOD had to 
dispose of the flares. The company evaded approximately $10 million in 
AD duties.
    In February 2007, ICE agents in Atlanta received an allegation from 
CBP Import Specialists that Goshen Trading (Goshen) was submitting 
fraudulent documents to CBP to evade the payment of AD duties on wooden 
bedroom furniture from China. The goods were allegedly being 
intentionally misclassified as ``other'' or ``dining'' furniture from 
China. On April 10, 2007, ICE SAC Atlanta agents executed Federal 
search warrants at two Goshen business locations and at the residence 
of Goshen's owner, Seng Ng, which resulted in the seizure of 27 boxes 
of documents and eight computers. Subsequent analysis of the seized 
documents and computers identified evidence substantiating that Goshen 
knowingly and willfully submitted fraudulent documents to CBP on at 
least 185 separate importations of Chinese wooden bedroom furniture. On 
May 13, 2009, Ng pled guilty to 18 U.S.C. 542, entry of goods by means 
of false statements or invoices. On July 27, 2009, Ng was sentenced to 
14 months in prison, and ordered to forfeit $5,993,433.70 to the United 
States in restitution.
    In February 2008, ICE's SAC office in Chicago and the Food and Drug 
Administration, Office of Criminal Investigation (OCI), began 
investigating Alfred L. Wolff, Inc., for the transshipment of Chinese 
honey to evade paying 221 percent AD duties. YongXiang Yan, a Chinese 
manufacturer of honey and the president and chairman of the board of 
Changge City Jixiang Bee Product Co. Ltd. (Jixiang), supplied Alfred L. 
Wolff, Inc., with Chinese honey that was transshipped through the 
Philippines before entering the United States. To date, this 
investigation has led to 14 indictments of 11 individuals and five 
companies, and a forfeiture provision for approximately $78 million in 
evaded dumping duties and an additional $39.5 million in 
undervaluation. In addition, five individuals have been arrested, two 
of whom have pled guilty and have been sentenced. Hung Ta Fan, the 
owner of four companies in the United States that were used to 
fraudulently import the honey from China, was sentenced to 30 months in 
prison and fined $5 million, and Yan was sentenced to 18 months and was 
fined $3 million.
    ICE SAC San Diego investigated Arturo Huizar-Velazquez, a citizen 
of Mexico, for circumventing AD duties on Chinese-made metal hangers. 
The metal hangers were shipped from China through the Port of Long 
Beach California to Mexico, where they were relabeled as a product of 
Mexico and then imported in the United States. On March 9, 2010, a 
shipment of wire hangers from China, destined for Huizar-Velazquez in 
Mexico, was examined at the Port of Long Beach and marked with 
invisible ink. On March 17, 2010, this marked shipment was presented 
for export into Mexico at the Otay Mesa port of entry. On March 19, 
2010, the marked shipment was re-presented for entry into the United 
States. On March 20, 2010, the shipment was examined, the invisible ink 
was observed and it was noted that the majority of the cartons were the 
same as those seen on March 9, 2010, in Long Beach. Additionally, all 
the cartons in the shipment were now stamped ``Made in Mexico'', which 
was not the case prior to being exported to Mexico. Huizar-Velazquez 
and his employee, Jesus De La Torre-Escobar, were arrested and charged 
in a 55-count indictment for entry of goods falsely classified, 
smuggling of goods, money laundering, and structuring of currency. The 
indictment included a forfeiture provision for $5 million. De La Torre-
Escobar pled guilty to one count of conspiracy and Huizar-Velazquez 
pled guilty to conspiracy, entry of goods by false statements, false 
statements, wire fraud, and money laundering. De La Torre-Escobar was 
sentenced to 355 days in prison and required to pay $3.4 million in 
restitution. Huizar-Velazquez is scheduled to be sentenced on May 31, 
2011.
    It is important to note that ICE criminal investigations are the 
last line of defense against the evasion of AD/CVD. By the time ICE 
investigators are involved in a particular case, the alleged violators 
have already committed customs fraud by evading or by attempting to 
evade dumping duties. To further deter these activities and protect 
U.S. business interests in the global economy, the United States 
Government must also continue its efforts to educate the public and 
foreign industry about the penalties of our successful investigations 
and enforcement actions.
                               conclusion
    Thank you once again for the opportunity to appear before you today 
to discuss the important role that ICE plays in combating illegal trade 
practices and commercial fraud activities and enforcing AD/CVDs. I 
would be pleased to answer any questions that you may have at this 
time.

    Senator Landrieu. Thank you very much.
    Mr. Lorentzen.
STATEMENT OF RONALD LORENTZEN, DEPUTY ASSISTANT 
            SECRETARY FOR IMPORT ADMINISTRATION, 
            DEPARTMENT OF COMMERCE
    Mr. Lorentzen. Thank you, Madam Chair Landrieu and Ranking 
Member Coats for inviting me to appear before you today.
    As the Deputy Assistant Secretary of Commerce for Import 
Administration, my charge is to enforce the AD/CVD laws in 
order to counter unfair trade practices that injure U.S. 
industries. And we do this in close and daily cooperation with 
our colleagues at DHS.
    Under U.S. law, DOC conducts AD/CVD investigations and 
administrative reviews to determine whether imported 
merchandise is dumped or is subsidized by foreign governments. 
If our investigation finds that imports have been dumped or 
unfairly subsidized and if the International Trade Commission 
(ITC) finds that the domestic industry has been injured as a 
result, we issue an AD or CVD 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 and upon request by 
an interested party, we will review the entries made in the 
prior year to determine the actual level of duties owed.
    Section 781 of the Tariff Act of 1930 empowers my agency to 
identify and counteract circumvention of AD/CVD orders. Under 
these provisions, DOC may conduct circumvention inquiries when 
it is alleged that minor alterations have been made to subject 
merchandise in order to evade AD or CVD orders, or 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.
    DOC can also find under these statutory 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, 
DOC may, after consulting the ITC, 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. We are currently investigating 
seven allegations of circumvention involving imports of various 
steel, textile, industrial, chemical, and paper products.
    Beyond our own authority to address circumvention, we work 
daily with CBP, ICE, and the Department of Justice (DOJ) to 
assist them in enforcing the customs laws and ensuring our 
border measures are effective. In 2006, we established a 
Customs Liaison Unit under the direction of our Deputy 
Assistant Secretary for AD/CVD Operations to work with CBP and 
ICE on fraud and evasion matters related to AD/CVD measures. 
This staff meets regularly with their CBP and ICE colleagues to 
share information and coordinate responses to fraud and evasion 
threats.
    In February of last year, the AD/CVD portion of CBP's new 
commercial trade tracking system, the Automated Commercial 
Environment (ACE) went live for entries of merchandise subject 
to AD/CVD orders. This new system allows us to maintain more 
efficient communication with CBP and the proper application of 
AD/CVDs.
    For example, ACE now allows us to apply duties on a per-
unit basis, in addition to the typical ad valorem rates. This 
helps us to counter situations where companies understate the 
value of their imported merchandise, and we have opted to apply 
per-unit rates in several dumping cases, including crawfish, 
honey, activated carbon, and garlic from China, as well as fish 
fillets from Vietnam.
    In the course of our work, our staff may come across 
information indicating the possible evasion of AD/CVDs, and we 
have also encountered in our work, situations in which foreign 
manufacturers have presented us with false documents. To deal 
with this, we have issued an interim final rule to amend our 
regulation governing the certification of factual information 
submitted to us in AD/CVD proceedings, and are currently 
awaiting comments from interested parties so that we may issue 
the final rule.
    The amendments strengthen current requirements by mandating 
that the party submitting information identify specifically the 
documents, time period, party, and date to which the 
certification applies. These changes will better ensure that 
parties and their counsel can be held legally responsible for 
the authenticity of specific documents given to us and are 
aware of the consequences of certifying false documents.
    When DOC uncovers information that indicates possible 
evasion of the AD/CVD laws, we have the statutory authority to 
provide that information to our colleagues at DHS, and we do 
so. Once a fraud or evasion investigation involving an AD/CVD 
case is initiated by ICE, we are often asked by CBP or ICE 
agents or the U.S. attorney conducting the investigation to 
provide assistance.
    Cooperation among our agencies has resulted in indictments, 
convictions, and prison sentences for evaders of AD/CVD orders, 
and my written testimony provides examples of the fruits of 
that labor. My agency is committed to strict enforcement of the 
unfair trade laws and will continue to work actively with our 
partner agencies to minimize evasion of them.

                           PREPARED STATEMENT

    Thank you for providing me the opportunity to speak to you 
today, and I am happy to take your questions.
    [The prepared statement follows:]
                 Prepared Statement of Ronald Lorentzen
    Thank you Chairman Landrieu and Ranking Member Coats for inviting 
me to appear before you today to discuss the issue of the evasion of 
anti-dumping duty and countervailing duty (AD/CVD) orders and the 
efforts of the Department of Commerce (DOC) to enforce the trade remedy 
laws.
    As the Deputy Assistant Secretary for Import Administration (IA) at 
DOC, my primary responsibility is to administer the AD/CVD laws, which 
are designed to counter unfair trade practices that injure U.S. 
industries in our domestic market.
    As part of the Trade Agreements Act of 1979, the Congress 
transferred from the Department of the Treasury to DOC the 
responsibility for administering the AD/CVD laws. And then, in the late 
1980s, the Congress gave DOC additional authority, under section 781 of 
the Tariff Act of 1930, to deal with the potential circumvention of AD/
CVD orders. Moreover, as a matter of daily business, we cooperate with 
U.S. Customs and Border Protection (CBP) and U.S. Immigration and 
Customs Enforcement (ICE) in a variety of ways to try to counter and 
thwart various duty evasions schemes.
    DOC conducts AD/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 (ITC) finds that a domestic industry has been injured as a 
result of the unfairly traded imports, we issue an AD duty or CVD 
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 conduct an administrative 
review of the entries from the past year to determine the actual level 
of dumping or subsidization during the prior 1-year period.
    DOC's role in detecting and deterring the circumvention of AD/CVDs 
is addressed in section 781 of the act. Pursuant to those provisions, 
DOC may conduct circumvention inquiries when:
  --It is alleged that minor alterations have been made to subject 
        merchandise in order to evade AD/CVD orders; or
  --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.
    DOC 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, DOC may, 
after taking into account any advice provided by the ITC, 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. For example, in October 2006, DOC published 
the final affirmative determination of circumvention of the AD order on 
petroleum wax candles from China. DOC determined that candles composed 
of petroleum and more than 50 percent or more palm and/or other 
vegetable oil-based waxes (``mixed-wax candles'') were later-developed 
merchandise and, thus, were circumventing the AD order. In addition, we 
determined that mixed-wax candles containing any amount of petroleum 
are covered by the scope of the order.
    DOC is currently investigating seven allegations of circumvention, 
including steel wire garment hangers from China, laminated woven sacks 
from China, small diameter graphite electrodes from China, glycine from 
China, tissue paper from China, cut-to-length carbon steel plate from 
China, and ferrovanadium from Russia.
    In the tissue paper inquiry, DOC recently made a preliminarily 
determination that certain tissue paper processed and exported to the 
United States by a Vietnamese company was circumventing the AD order on 
tissue paper from China. Based on this determination, DOC directed CBP 
to suspend liquidation and collect cash deposits at a rate of 112.64 
percent for all exports from the Vietnamese company retroactive to the 
date we initiated the circumvention inquiry. We will be taking comments 
from interested parties prior to making a final determination in this 
case in August.
    Similarly, in a case involving cut-to-length carbon steel plate 
(steel plate) from China, it was determined that a Chinese producer was 
adding boron to the steel plate in an attempt to circumvent the order 
and avoid paying AD duties by making the boron-infused steel plate an 
out-of-scope product. In August 2009, DOC determined that imports of 
steel plate produced by the specific Chinese exporter involved in this 
scheme should be covered by the steel plate order and directed CBP to 
suspend liquidation of entries of the merchandise. We are now 
conducting another inquiry to determine if a similar ruling should 
apply to all imports of the same merchandise from China.
    In addition to the authority specifically prescribed to DOC by the 
statute, we work in close cooperation with CBP, ICE, and the Department 
of Justice (DOJ) to assist them in enforcing the customs laws and 
ensuring our border measures are effective.
    In 2006, IA formally established a Customs Unit, which falls under 
the direction of our Deputy Assistant Secretary for AD/CVD Operations. 
The Customs 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/CVDs in a timely manner.
    In February of last year, the AD/CVD portion of CBP's new 
commercial trade tracking system--the automated commercial environment 
(ACE) went ``live'' for entries of merchandise subject to AD/CVD 
orders. ACE allows DOC to maintain much more efficient communication 
with CBP in the implementation and application of the AD/CVD 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 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, DOC 
has imposed a cash deposit rate of $5.23 per/kilogram for an exporter's 
entries of crawfish from China. Thus, even if the value of the 
merchandise is undervalued upon entry, the full amount of the duties 
owed is being applied.
    In the course of our proceedings, particularly our annual 
administrative reviews, our staff occasionally comes across information 
indicating the possible evasion of AD/CVDs, and DOC has also 
encountered situations in which foreign manufacturers have presented 
false documents during the course of an AD/CVD proceeding. In response 
to such behavior, we recently amended our regulation governing the 
certification of factual information submitted to DOC 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:
  --identify to which document the certification applies;
  --to which segment of an AD/CVD proceeding the certification applies;
  --who is making the certification; and
  --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.
    When DOC uncovers information that indicates possible evasion of 
the AD/CVD laws, we have the statutory authority to provide that 
information to DHS. Upon examination of the information provided, 
authorities at DHS may initiate an investigation which may 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, DOC is frequently asked 
by CBP/ICE agents or the Assistant U.S. Attorney prosecuting the 
investigation to provide assistance.
    Cooperation among DOC, CBP, ICE, and DOJ has resulted in 
indictments, convictions, and prison sentences for evaders of AD/CVD 
orders. Such cooperation led to the indictment of Alfred L. Wolff Gmbh, 
a German food conglomerate, and 10 executives. Federal prosecutors 
alleged that the conglomerate and 10 of its executives conspired to 
illegally import more than $40 million of honey from China between 2002 
and 2009, and concealed its country of origin in order to avoid paying 
nearly $80 million in AD duties. Also indicted was Gong Jie Chen, a 
Chinese national who was the sales manager for a company called QHD 
Sanhai Honey Co., Ltd., located in Hebei Province, China. He allegedly 
set up this company as a front to conceal the Chinese origin of the 
honey being shipped to the United States and to avoid paying AD duties.
    The defendants were charged with conspiracy and smuggling, 
falsifying documents submitted to CBP and DOC, and violating food and 
drug safety laws. The defendants allegedly destroyed records and other 
evidence of fraud, including internal emails and documents that were 
allegedly used to falsify the origin of the honey and to avoid paying 
the AD duties. If convicted, some of the defendants could face more 
than 20 years in prison.
    During a fraud investigation of steel wire garment hangers from 
China, DOC assisted the Assistant U.S. Attorney prosecuting the 
investigation by providing background and guidance regarding the AD 
process. After completion of the fraud investigation, a U.S. importer 
was arrested and charged with fraud, smuggling, and money laundering in 
connection with bringing Chinese-made hangers into the United States 
via a third country and falsely claiming a country of origin other than 
China. Conviction on these felonies carries a maximum prison term of 
between 5 and 20 years per count, plus substantial monetary fines and 
the payment of applicable dumping duties.
    Further, during verification of the respondent, Cantho Agricultural 
and Animal Products Im-Ex Company (CATACO), in the first administrative 
review of frozen fish fillets from Vietnam, DOC officials found 
evidence of mislabeling and duty reimbursements. This information was 
conveyed to ICE, providing critical information for their criminal case 
against one of CATACO's importers. As a result, in 2007, the U.S. 
District Court in Panama City, Florida, sentenced Danny Nguyen to 
Federal prison, and issued criminal fines to Panhandle Seafood, Inc., 
and Panhandle Trading, Inc. for a multi-year scheme that involved 
smuggling and distributing mislabeled frozen fish fillets into the 
United States and Canada from Vietnam. The 42-count criminal indictment 
charged that from 2002 to 2005, Mr. Nguyen and his two companies 
conspired with Vietnamese fish exporters to intentionally mislabel 
hundreds of thousands of pounds of Vietnamese frozen fish fillets. 
Nguyen was charged with importing fish into the United States that was 
incorrectly labeled as grouper and other fish types in order to avoid 
U.S. AD duties.
    After pleading guilty, Mr. Nguyen received a sentence of 51 months 
imprisonment and 3 years supervised release. Panhandle Seafood Inc. 
received 5 years probation and forfeited the real property of the 
business. Panhandle Trading Inc. was also ordered to pay restitution of 
$1.3 million and received 5 years probation.
    In another evasion scheme involving frozen fish fillets from 
Vietnam, DOC found that some Vietnamese exporters and U.S. importers 
were mislabeling the subject merchandise as other types of fish that 
were not subject to AD duties in order to avoid those duties. 
Investigation and cooperation among several Federal agencies have 
resulted in several convictions, indictments, and prison sentences. For 
example, in October 2008, 12 individuals and companies were convicted 
of criminal offenses related to a scheme to avoid paying duties by 
falsely labeling fish for import and then selling it in the United 
States at below market price. Two Virginia-based companies, Virginia 
Star Seafood Corporation and International Sea Products Corporation, 
illegally imported more than 10 million pounds of frozen fish fillets 
from companies in Vietnam, valued at $15.5 million.
    In the 2005-2006 AD review of freshwater crawfish from China, DOC 
obtained evidence showing that imports claimed by the respondent to be 
whole crawfish (nonsubject merchandise) were in fact imports of 
crawfish tail meat (subject merchandise). DOC worked with CBP and the 
Food and Drug Administration (FDA) to obtain evidence that DOC 
ultimately used in its determination to base the respondent's dumping 
margin on adverse facts available, resulting in a relatively high-
dumping margin. Some of the evidence obtained by DOC included entry, 
sales, and shipping documents, FDA photographs of the imported product 
in question showing that the bags contained crawfish tail meat, not 
whole crawfish, warehouse records, FDA surveillance reports, and 
information regarding CBP's reclassification of merchandise from 
``certain disputed entries'' to ``entries of subject merchandise''.
    The examples I have just provided illustrate the close and 
expanding relationship between DOC, DOJ, ICE, and CBP with regard to 
stopping duty evasion. DOC is committed to strict enforcement of the 
unfair trade laws and will continue to work intensively and actively 
with our sister agencies to minimize evasion of AD/CVDs.
    Thank you for providing me the opportunity to testify. I am happy 
to take your questions.

    Senator Landrieu. Thank you very much.
    Mr. Yager, let me begin with you. If you could help us 
understand a little more clearly the size of this problem? How 
many AD/CVD cases are received annually in your review? Is that 
volume going up significantly or down? Could you comment?
    Mr. Yager. Yes, Madam Chair Landrieu. When we did our 
report in 2008, there were slightly more than 240 open AD 
orders. I believe as of March of this year, there are more than 
300. But I think that is only one way to measure the scale of 
the problem.
    One of the other ways is to think about the workload impact 
that it has, for example, at DOC and CBP. Particularly at CBP, 
each one of those orders that is received and is open could 
cover one country, but multiple different tariff specific 
products, as well as many firms.
    In addition, because of the fact that we have the system 
that provides updates and a retrospective system, it also 
requires a great deal of work for each one of those open 
orders.
    Senator Landrieu. Right. I wanted to understand, and I am 
glad you pointed that out, an order is not just one importer or 
one company trying to circumvent the rule on one line of 
product. An order could be multiple----
    Mr. Yager. An order tends to be for one country.
    Senator Landrieu. Okay.
    Mr. Yager. But it could cover, for example, 6, 8, 12 
specific tariff schedule items, which are highly specific. So, 
within the steel area, for example, it could contain a number 
of different steel products within that broad order. And each 
one of those orders would typically have specific rates for 
certain companies, and then it would have an all-country rate 
for those that do not have that specific information.
    So there is a great deal of difference between one order 
and the next. Some could be relatively narrow and specific with 
a few companies and not a great volume of imports, and others 
could be substantial.
    But I think one other thing to point out is that the impact 
also differs greatly and the importance of this differs 
greatly. As you mentioned in your opening statement, there are 
certain industries, particularly aquaculture and agriculture, 
where the impact of this noncollection is particularly 
important for a variety of reasons, some of which have to do 
with the nature of the industry.
    As you mentioned, the seafood industry tends to be small 
operators. There is a great deal of entry and exit in that 
industry. And many of the nonpayment issues are highly 
concentrated in the industry of seafood, whether it is 
crawfish, shrimp, or some others. And so, the impact is highly 
concentrated, particularly on certain types of aquaculture and 
agriculture industries.
    Senator Landrieu. And let me ask you for your comments 
about this liquidation issue. I am a little unclear about the 
testimony that we are receiving about it. Is our liquidation 
process working or not working?
    Mr. Yager. Okay. There are a couple of different aspects of 
the liquidation process, which I think are worth talking about 
at this hearing. One that I brought up specifically in my oral 
statement was something called deemed liquidation, and that is 
the requirement that the United States has that CBP needs to 
provide those instructions to the ports and publish that 
information within 6 months of receiving the information from 
DOC.
    And if they do not get it out within the 6 months, then the 
United States does not have the right to collect any additional 
duties that may be owed. So that is one particular aspect.
    Senator Landrieu. So the bottom line is if we don't act, 
tons and tons and millions and billions of dollars could flow 
into this country illegally if they just get through the 6-
month review period, and then we basically can't touch them?
    Mr. Yager. I believe that we wouldn't call it illegally 
because that would be the responsibility of the United States 
to ensure that that liquidation is performed within 6 months. 
So we would forfeit the ability to collect any additional funds 
that might be due on those imports.
    Senator Landrieu. Do you have an estimate of, in your view, 
having done this review, of what our gap is? In other words, 
are we collecting 20, 30 percent of what you think is owed? Is 
there any way to judge how far off our collections are?
    Mr. Yager. Madam Chair Landrieu, that is an excellent 
question. I think maybe we can also ask CBP for that. But I 
think one of the things that is really quite important and 
makes it very difficult to do work in this area is that once 
the goods have entered the United States, Customs, as they 
mentioned in their opening statement, collects that initial 
deposit as well as a bond.
    But until the final determination is made by DOC, which 
could be anywhere from 1 year to numerous years later, it 
really is not clear what their final duty will be, and no one 
can estimate what that will be because it depends upon the 
investigations that are then put in place by DOC. So it is an 
excellent question. And because of the complexity of the system 
that we have, it is really quite difficult to answer that.
    Of course, the point you made in the opening statement is 
that on a cumulative basis, there have been more than $1 
billion in collections that we have not been able to get for 
the U.S. Government over approximately a 10-year period. I 
think that is the best measure of the uncollected duties, at 
least that we could find.
    Senator Landrieu. All right. I have other questions, but 
let me turn to my ranking member.
    Senator Coats. Thank you.
    Just answered one of my questions. You mentioned four 
industries constitute 84 percent of uncollected duties. Would 
you name those four industries?
    Mr. Yager. The information that we have, Senator Coats, is 
from 2008, and I can tell you what those industries were. They 
were honey, crawfish, fresh garlic, and mushrooms. And I 
believe there are some other products that are also in that 
list, but those are the top four as of 2008.
    I believe those are the ones that we mentioned. And I don't 
know whether there is a change. I think there are some 
additions to that. But those were the four most important 
industries in 2008.

                            RESOURCES NEEDS

    Senator Coats. Knowing that, how do you allocate your 
resources and personnel? And the larger question is, do you 
have the resources that you think you need or the personnel you 
need to not only address the major four, but also not overlook 
those that fall below the top four, but are still critical in 
terms of our dealing with protections for U.S. industry?
    Mr. Yager. Ranking Member Coats, when we did the work for 
the Congress in 2008, we did ask questions about whether the 
human capital was sufficient at the agencies, such as DOC and 
CBP. At that time, we had found that, at least in DOC, they 
were working with significantly less than their full-time 
equivalents (FTEs) in order to process these orders.
    And I think that would be, obviously, a good question for 
DOC to answer at this point as to whether they have the people 
necessary to perform these functions?
    Senator Landrieu. Mr. Lorentzen.
    Senator Coats. Would you like to follow up on that?
    Mr. Lorentzen. I think in the current environment, all 
agencies are struggling to be as economic as they can be with 
the resources that they have. But we do feel that we have 
adequate resources, as set forth in the President's current 
year budget.
    Thank you.
    Senator Coats. You are one of the few who has come before 
us on any appropriations matter that says we have adequate 
resources. Congratulations.
    Particularly at a time of fiscal constraint, it is 
important to hear that. But it is also important for us to know 
that in the area of enforcement and collection that sometimes 
we may be shortchanging ourselves. Maybe a few more resources, 
if necessary, would more than pay for itself.
    I am not asking you to change your testimony here, but you 
should feel free to let us know if there are ways that we can 
either help you in terms of allocating resources in certain 
areas that would result in better benefits for us--not just 
from the collection standpoint, but also from the protection 
standpoint for our industries.
    You also mentioned that China accounted for 90 percent of 
uncollected duties. I assume then that we could draw the 
conclusion that that is where you are focusing at least 90 
percent of your efforts. And I am wondering are there things 
that we can do or provide, or that you need in order to better 
focus that concentration on a country that is clearly the most 
egregious offender of all of these protections?
    Senator Landrieu. Mr. Gina----
    Senator Coats. I say it to the panel, and I think whoever 
is most directly associated with that question should address 
it.
    Mr. Gina. Just for clarification in conjunction to what Mr. 
Yager had stated, the most current update on the five items 
that posed the greatest challenge for us are, as indicated: 
crawfish, fresh garlic, honey, mushrooms, and wooden bedroom 
furniture. All, as you stated, Senator, originating from China. 
It comprises approximately 84 percent, or $878 million of the 
approximate $1 billion that has yet to be collected over the 
past 10 years.
    I think an interesting statistic is that, as you stated, 
Senator Landrieu, even though there is X number of orders, 
there was approximately 160,000 entries that were closed out in 
fiscal year 2010 relative to AD/CVD. Of that, 60 percent of the 
time, the duty that was initially assessed stayed the same. 
Twenty-four percent of the time, the duty that was assessed 
actually was lowered, and the Government issued a rebate.
    It is that last 16 percent of the time, or approximately 
25,600 entries, where the duty was increased. And in reading 
the GAO report prior, I think this study showed, of that 16 
percent, about one-half the time the increase is somewhat 
within the 4-percent range. But it is that other one-half of 
that 16 percent where the increase is significantly increased. 
And therefore, the challenges that presents relative to the 
collection are the fact that sometimes actual legitimate 
importers can't afford to pay.
    Surety companies that have written the bonds for these 
importers, two of them are in receivership because, I guess, 
they just never counted on that much additional money being 
owed. The collection efforts that we then have taken is, first, 
our Office of Administration will issue bills. If payments are 
not made, those cases are referred to our Office of Chief 
Counsel. They take the appropriate measures to try to collect.
    If they don't have success, they are referred to DOJ for 
possible additional action and/or bringing individuals into 
court. We will go back at times and even ask our colleagues at 
ICE, who is CBP's investigative arm, if there is additional 
information in trying to collect it.
    So it is that small percentage of individuals which are 
imposing the greatest consequence relative to these collections 
of duties.
    Senator Landrieu. Can I follow up on that for just a 
minute?
    Senator Coats. Sure. Yes.
    Senator Landrieu. Let us follow that line for just a 
minute. Because if the 16 percent that you have identified 
after you review owe substantially more money than initially 
completed or assessed, and you said that sometimes the surety 
bonds backing up that group are not substantial enough to 
provide that revenue, of that 16 percent, is it the same sort 
of bad actors? Is it the crawfish in that 16 percent, the 
shrimp, the mushrooms, the honey, and the bedroom furniture? Or 
is it other things within that 16 percent?
    So it is sort of a pattern that can be identified is what 
you are saying?
    Mr. Gina. Right. And I think what we had attempted to do, 
and we are continuing to evaluate how to be more effective. As 
I stated in my oral statement, we attempted to modify our 
bonding and the issuance of much greater enhanced single-
transaction bonds.
    The normal bonding requirement or rule of thumb is that you 
go to an importer's past 12 months history, and it is 10 
percent of the duties, revenues, or taxes that are submitted to 
the Government. What we attempted to do was, in order to secure 
a greater surety of payment, issue bonds relative to the actual 
value of the imports, plus the duty. That, of course, was 
challenged, and we are trying to come up with different 
measures that would be accepted.
    Senator Landrieu. But, Mr. Gina, and one thing, Senator, I 
want to just bring to our attention. I mean, one of the things 
that concerns me is that CBP has 58,700 employees, 20,000 
patrol agents, 22,000 are the officers, cargo and passenger, 
air, land, and sea ports of entry. And only 13 of these 
employees are fully dedicated to AD/CVDs.
    Is that your understanding? And I also understand there are 
more than 1,200 import specialists, Revenue Division personnel 
lawyers, but only 13 people dedicated to AD/CVDs out of an 
agency of 58,000. Is that correct?
    Mr. Gina. I think it is misleading, Senator.
    Senator Landrieu. Okay.
    Mr. Gina. If I might, CBP has approximately, out of the 
58,000, 9,600-plus employees involved in commercial trade. Of 
that, 1,000-plus are solely dedicated to the Office of 
International Trade. Of that number, approximately 2,500 
positions are what we refer to as nonuniformed positions.
    So if I may list, just as an example of some of those 
nonuniformed positions that would get possibly involved in the 
course of their day-to-day activity as part of their collateral 
duties are chemists, customs attorneys, auditors, drawback 
specialists, entry specialists, financial system specialists, 
fines, penalties, and forfeiture specialists. There are 
approximately 900 import specialists, national account 
managers, and seized property specialists.
    Of those individuals, that is also augmented by the 5,000 
CBPO uniform and 2,000-plus agricultural inspectors. The 
numbers that you stated, those individuals we believe are 
augmented by individuals who primarily focus, are the subject 
matter experts is the eight staff in the Office of 
International Trade dedicated to AD/CVD.
    We also have a national targeting analysis group in south 
Florida that is 1 of 5, which focuses solely on AD/CVD. And it 
is those individuals who are doing the risk analysis, which is 
then directing those thousands of individuals in the field.
    Senator Landrieu. I think that is one of the things that 
Senator Coats and I really want to get to the bottom of in this 
hearing, and I know our time is limited. But what are your 
resources? How are they being applied?
    And if they could be applied in a better fashion, how much 
additional revenue we could generate not just for the Federal 
Treasury, but potentially a stream of that revenue could come 
back to your individual agencies to step up your efforts. I 
mean, this is really a very tragic situation as it relates to 
crawfish and shrimp, I can tell you.
    I mean, it is putting huge pressure on an industry that 
could--it is small businesses in our State that have very sort 
of low-entry level. You need a boat. You need the ability to 
work hard and long hours, gasoline in the boat, and some skill 
to shrimp. But otherwise, it is a fairly low barrier of entry. 
People can make a lot of money in good times shrimping.
    But with this situation, no one in my State can make any 
money because they are just absolutely overwhelmed with the 
dumping activities, and that is just seafood. And that is just 
crawfish and shrimp. I don't know about honey and garlic, and I 
am very curious as to why we don't import bedroom furniture, 
but it seems like we can import dining room furniture. Did you 
hear that?
    But I will come back to that in a minute. Maybe I missed 
something.
    But one more thing, Mr. Ballman, could you comment on your 
positions? We understand there are only 39 full-time positions 
out of a corps of 9,390 with ICE?
    Mr. Ballman. Certainly, Madam Chair.
    It is also a little misleading here. The 39 is FTEs. We 
have 26 SAC offices, each of which has a commercial fraud 
investigative group. Then we have all the sub offices that are 
under those who have agents that aren't specialized, but they 
do carry commercial fraud cases, including AD cases as well.
    So what the FTE amounts to is we have taken all the hours 
that were applied to AD investigations and came up with that 
figure. That doesn't mean we only have 39 people working the 
cases, and we are only working 39 cases. That just means that 
the accumulations of hours would mean 39 man-years went into 
those investigations in 1 year.

              INTERNATIONAL TRADE ADMINISTRATION STAFFING

    Senator Landrieu. Okay. And Mr. Lorentzen, if you could 
comment? There are 1,500 positions in International Trade, 300 
individuals dedicated to AD compliance. Is that your 
understanding?
    Mr. Lorentzen. Yes, Madam Chair. That is approximately 
correct.
    The International Trade Administration has four business 
units. The unit that I am responsible for, Import 
Administration, has its core mission of enforcing the law, as I 
indicated. And right now, we have an operational staff of about 
294 financial analysts, accountants, and investigators, and a 
legal staff of a little more than 30 lawyers that assist us in 
that work.
    Senator Landrieu. And Mr. Yager, let me, just as my last 
question before turning it back over to Senator Coats, we are 
going to submit a lot of questions for the record because we 
want to get to our second panel. What is your general view, 
having investigated or reviewed their operations, in terms of 
the resources that are being applied to collecting--identifying 
the fines, collecting them, having the inspectors to go after 
the bad actors, and focusing, as Senator Coats said, on the 
obvious either bad actors or areas or countries or products?
    Mr. Yager. That is one of the two things that we mentioned 
or that I mentioned in the oral statement, and that is they do 
have the personnel in order to process these types of orders. 
And I think one of the things that did alarm us, though, is the 
fact that CBP has a significant challenge in trying to plan the 
workload that they need to get through because some of these 
orders, as I mentioned, are quite complicated. And they don't 
know from one day to the next just how many orders they are 
going to need to have to process.
    And because they have that 6-month deadline and because of 
the complexity, there have been times when we have had that 
situation of deemed liquidation, which, again, is our 
forfeiture of the right to collect those----
    Senator Landrieu. Because they don't have an ability to 
surge their personnel or et cetera?
    Mr. Yager. Certainly if we were managing that office, we 
would do everything we can to understand what our workload is 
going to be for the next week, month, 6 months, and 1 year. And 
I think in this environment, it seems quite difficult for them 
to be able to do that.
    If I could just respond, too, also to a couple of points 
that were made earlier by Mr. Gina, we do think that 
considering a single-transaction bond is one way to try to 
target your efforts. Because I think what we found when we did 
the work earlier on shrimp and others is that some of the 
measures that they put in place had a lot of what you would 
call ``collateral damage''.
    It imposed costs on many importers who fully intended to 
pay their bills. But as you noted, you have many small firms in 
these different industries, and when you impose costs on the 
full range of importers when your focus is really on a few bad 
actors, then that is not a very efficient system.
    To the extent that they can focus and target their 
enforcement efforts and get additional monies from those firms 
who have no intention to pay, that would be a much more 
effective system, and I think that is one possibility. Using 
that single-transaction bond might offer you that kind of an 
option.
    And one other comment that you made is finding that balance 
between security and the commercial side is something that CBP 
and all of DHS has struggled with since the creation. But we do 
recognize that with the current commissioner, there is much 
more emphasis on revenue.
    In the past, we had to ask why the inspector general of DHS 
had not done a single financial audit since the creation of the 
Department. We think now that the attention to that commercial 
side is growing again will give these offices the opportunity 
to perform their missions.
    Senator Landrieu. Thank you.
    Senator Coats. I want to make a point and then also ask a 
question. The point is it is clear one of the nations that we 
have a very significant relationship with, particularly in 
terms of trade, is China. Yet we are hearing and reaffirming 
what all of us know--it is not been a responsible trading 
partner. Whether it is China's inability to let its currency 
float against the dollar in the way that everyone has had to 
do--virtually everyone else--or whether it is in this area of 
trade violations that we have been discussing today clearly is 
something that needs to be run up the flagpole.
    When the Secretary of Commerce interacts with his 
equivalent in China, when the President or Vice President 
interacts with their equivalents in China, trade enforcement 
needs to be a continued top priority. We appreciate the job 
that you are doing, but some of this effort, particularly when 
we target it the way we can, needs to be accompanied with 
support for you from the highest possible levels and from 
demands from us at the highest possible levels.
    This is something that has been going on for a long time, 
and it is egregiously hurting American industry and American 
jobs. And I know that we are, unfortunately, indebted to the 
Chinese to a larger extent in terms of financing our debt than 
any nation should be. And that is a separate issue in and of 
itself.
    Nevertheless, there ought to be some rules that the world 
community of trade engages in, and clearly, this is something 
that has to be addressed at a higher governmental level.
    On the way in this morning, I was listening to sports 
radio, and they were talking about the fact that the NFL, which 
conducts annual meetings with the new drafted rookies for the 
purpose of informing them and acquainting them with what the 
responsibilities are, the legalities, the ethics, and 
everything else, as someone moving into the NFL, on a new team. 
Kids coming out of college, and so forth and so on.
    And that annual NFL meeting had to be suspended or 
terminated because of the walkout and so forth. But the 
discussion was how important it is at the beginning of the 
process to know what the rules, regulations, ethics 
requirements, and personal performance requirements in terms of 
how you interact as someone that is a part of the organization.
    And so, when you were talking about when the statistic came 
up about 40 percent of the uncollected revenues come from new 
shippers, I am just wondering what kind of process do those new 
shippers have to go through before they have the right permits 
and licenses and so forth to do business with us. I am 
wondering if this is not a way to put the fear of enforcement 
penalty, including criminal violation, in front of those people 
before they are granted the right to ship into the United 
States.
    I am just wondering if we can't better put, as I said, a 
little bit of fear and particularly information in their hands 
so that they know they have to go through a pretty rigorous 
process before they are allowed to even get engaged. And if 
they violate those rules, there are going to be very severe 
penalties.
    Mr. Yager. Yes, Ranking Member Coats. The new shipper 
designation does create specific risks for the United States, 
particularly in the collection of AD duties. And new shipper is 
a category of firm that has not imported or not shipped goods 
to the United States under a particular order, and they apply 
to DOC to begin making those shipments, and they are given an 
initial rate.
    And oftentimes, that rate could be made on the basis of one 
or two or just a small number of shipments. At some later 
point, they might step up the value of shipments, the value of 
shipments and the volume. And then some years later, after a 
DOC review, it could turn out that that rate that they had 
initially been paying is nowhere near sufficient to cover the 
level of dumping that was actually occurring.
    So that new shipper problem is certainly one that we 
identified that does create specific risks for collection. And 
while many of the new shippers fully intend to pay their bills, 
it does appear that some firms use that as an opportunity to 
get a low rate, ship a great deal of product into the United 
States, and then walk when the bill becomes due.
    Senator Coats. It is clear then that we can do some things 
at the beginning to, hopefully, alleviate that issue.
    Anybody else want to comment on that? Then I am finished 
with my questions.

                              NEW SHIPPERS

    Senator Landrieu. Yes, and I just want to ask--that is a 
good question. I want to follow up. How long can you be a new 
shipper? For 1 year, 2 years, 3 years, 6 months? What is the 
new shipper designation? Go ahead.
    Mr. Lorentzen. As Mr. Yager explained, under the AD law, 
the law permits a new shipper to come to DOC and ask for its 
own rate. Because when----
    Senator Landrieu. But how long does that rate last?
    Mr. Lorentzen. So that rate would be established for them 
at the end of that review, assuming we first confirm that they 
are, indeed, a new shipper. We devote a lot of resources to 
confirming that they are not an affiliated party that is trying 
to sneak around the rate that they already have.
    So we look at whether the transaction is in commercial 
quantities and whether they are a bona fide shipper.
    Senator Landrieu. And how long does it last?
    Mr. Lorentzen. The rate resulting from a new shipper review 
can last for up to a year.
    Senator Landrieu. Okay. But nobody can be a new shipper for 
like 5 years?
    Mr. Lorentzen. No.
    Senator Landrieu. You can only be a new shipper for 6 
months, a year, and then you are an old shipper?
    Mr. Lorentzen. Once you have established they are a new 
shipper, you are given your specific rate. And then either the 
domestic industry or that shipper can ask that their rate be 
updated or reviewed in the following year.
    Senator Landrieu. Okay. Let me ask, because we have got to 
move to the second panel, but I do need to ask because each one 
of you have indicated that you do have sufficient resources to 
do the job we are asking you to do. If that is the case, now we 
are leaving $1 billion-plus on the table. So I don't know 
whether we don't have the people or we are not coordinating, 
but there is $1 billion-plus on the table that we are not 
collecting.
    So there is something that is not working as well as it 
could, and we need to try to figure that out. If it is not 
additional personnel or additional resources, what do each of 
you--and I am going to ask each of you to do two things 
quickly. What do you believe are required to pick up this $1 
billion that the American taxpayers are owed and our businesses 
deserve in terms of fair playing field for trade on these 
industries that have been identified this morning, starting 
with you, Mr. Gina?
    And then I will end with you, Mr. Yager.
    Mr. Gina. Very quickly, I think two items that may 
contribute to a significant change is the better utilization of 
single-transaction bonds, as alluded to, and also a further 
review of the new shipper program and trying to ensure that is 
not used as a loophole also in the circumvention of duties.
    Senator Landrieu. Mr. Ballman.
    Mr. Ballman. I think there are two areas from an 
investigative point of view that need to be addressed, the 
retrospective versus the prospective. So that if there is any 
way that--DOC is very good at setting the rates, but they do 
change.
    From an investigative standpoint, I need to be able to 
investigate one rate and know that I am not wasting my 
resources if that rate is lowered. And the other thing is the 
new shipper rule. In both cases that I mentioned in my oral 
statement, the honey, the people involved in that were trying 
to set up as a new shipper.
    They were actually under consideration by DOC when we found 
in our search warrant that everything they had provided to them 
was false. That added another 20-year count to the indictment, 
which was very nice for that.
    And then for the wooden bedroom furniture, we have seen 
that there are now trading companies that are getting a lower 
rate as a new shipper. So it doesn't surprise me at all that 
most of the imports are now coming from trading companies 
rather than the manufacturers.
    Senator Landrieu. Mr. Lorentzen.
    Mr. Lorentzen. To name just a couple of things, I would 
say, first of all, it has been stressed that we need to have 
more and more effective communication, which I think all of us 
are attempting to do, and we need to develop that further. I 
think the new automated system I referred to in my testimony 
helps us to achieve that. It allows direct contact between 
people in the ports and staff in my office to get real-time 
information.
    The other thing I would say on new shippers is the Congress 
at one point several years ago had suspended the bonding rule 
and required that cash deposits be posted by new shippers. That 
was for only a 3-year period of time, and it expired. And I 
think that would be a very practical and direct impact change 
that could address this problem.
    Senator Landrieu. And Mr. Yager.
    Mr. Yager. Yes. I believe there are three things that the 
Congress could be involved in that could help to address this 
problem.
    First is to look at the current structure of the new 
shipper arrangements because we do believe that creates a 
vulnerability. Second, I believe that the Congress should also 
require continued reporting on the amount of uncollected 
duties.
    Right now, CBP is required to report on uncollected duties 
under the Continuing Dumping Subsidy Offset Act, the Byrd 
amendment. But it does not report on all the uncollected 
duties. We think that that would be very helpful for the 
Congress and other stakeholders to get that kind of information 
in order to be able to monitor the status of the collections.
    And finally, I think there is a bigger discussion about 
whether the current system, the retrospective system that we 
have, can be effectively used in order to provide remedy to the 
U.S. firms, as well as provide the revenue to the U.S. 
Treasury.
    So those are the three things for the Congress. And of 
course, in my statement, I talked about better data analysis 
and better communication among the agencies as also being 
important.
    Senator Landrieu. Thank you. Your testimony has been 
excellent this morning.
    I do have a question, but I will ask for a response in 
writing, about the Jones Act, if DHS can enforce the Jones Act 
effectively without assigning priority to the mission and 
dedicating resources to accomplish it. Secretary Napolitano, 
before our Homeland Security subcommittee, said she had the 
resources necessary. But I am going to ask you all to clarify 
her comments in writing. Does DHS have a dedicated enforcement 
regime to investigate Jones Act violations, and if not, what 
would you need to establish one that can be effective? How 
would it engage with the Coast Guard and other agencies? How 
many people and what level of resources are dedicated to Jones 
Act enforcement? How many Jones Act cases does CBP review 
annually?
    [The information follows:]
                         jones act enforcement
    CBP receives information regarding alleged coastwise violations 
from a variety of sources and coordinates the review of allegations 
with ICE. While the offshore facilities are located outside the limits 
of the CBP ports of entry, this does not preclude the initiation of an 
appropriate action for violations.
    CBP enforcement of the Jones Act is a coordinated effort by CBP 
local ports of entry, CBP field offices and CBP headquarters (HQ) 
offices and personnel working with other U.S. Government agencies i.e., 
U.S. Coast Guard (USCG) and U.S. Immigration and Customs Enforcement 
(ICE) and industry. CBP field personnel work in conjunction with ICE 
Investigations and the USCG to address alleged coastwise violations. 
Guidance is provided in such cases by the CBP Penalties Branch of 
Regulations & Rulings (RR), Office of International Trade (OT).
    Cooperation with the USCG and ICE is essential to successfully 
investigate potential Jones Act violations. CBP is engaged with its 
partners in coordinated efforts to investigate allegations of coastwise 
movements in violation of U.S. laws. An example of this cooperation is 
the CBP port of entry (POE), Morgan City, Louisiana.
    The CBP Morgan City POE is responsible for providing coverage for a 
large portion of the Louisiana coastal area as well as monitoring the 
movement of foreign vessels operating at offshore facilities. Staffing 
levels and operational requirements require the port to demonstrate a 
great deal of flexibility in addressing allegations of Jones Act 
violations.
    To prepare all parties engaged in investigating potential Jones Act 
violations within the area of responsibility, the CBP Morgan City POE 
conducts ``Jones Act'' awareness training with USCG and ICE. When a 
Jones Act issue is brought to the attention of CBP Morgan City and it 
appears to be valid, CBP personnel will conduct a boarding in 
conjunction with the local USCG station and ICE. In many cases the USCG 
will ferry CBP personnel from Morgan City to the vessel operating at 
offshore facilities. The interagency team will collect evidence from 
the official vessel logs, and any cargo manifest and/or invoices from 
the vessel and interview crew to determine if a violation occurred. The 
local CBP Morgan City POE leverages existing Federal assets at other 
components and relies on a team approach to successfully address Jones 
Act violations.
                          jones act resources
    At the CBP HQ level, various offices are involved in reviewing, 
investigating and providing guidance and oversight on Jones Act issues 
to the field offices. They are comprised of the Office of Field 
Operations (OFO) Cargo & Conveyance Security (CCS); OFO Agriculture 
Programs and Trade Liaison (APTL); OFO Fines, Penalties and Forfeiture 
(FP&F); and the Cargo Security, Carriers, and Immigration Branch (CCIB) 
of Regulations & Rulings (RR), Office of International Trade (OT).
    OFO/CCS and OFO/APTL/FP&F each assign two program managers with the 
responsibility of managing and resolving coastwise issues.
    The CCIB is staffed with a branch chief, five attorney-advisors and 
an administrative assistant. Attorney-Advisors in the penalties branch 
of RR/OT also work on Jones Act matters. The CCIB falls under the 
jurisdiction of the Director, Border Security and Trade Compliance (RR/
OT), who is integral to Jones Act enforcement.
    CBP field offices at the port of entry level are staffed with 
vessel entrance and clearance specialists (VECS) and CBP officers 
assigned to identify and initiate potential Jones Act violations. These 
CBP front-line personnel are provided a number of in-house resources 
(e.g., training, directives, memorandums, handbooks, rulings, 
information notices, etc.) to assist in enforcing Jones Act statutes, 
regulations, and policy.
    Local CBP port directors assign and distribute resources at a level 
commensurate with the number of Jones Act violation allegations. For 
smaller CBP ports of entry, with high volumes of vessel entrances and 
clearances and wide-ranging port boundaries, this task has proven 
challenging, particularly in the Outer Continental Shelf (OCS) region.
    In fiscal years 2009-2011, all CBP ports of entry issued 57 Jones 
Act-specific penalties. In each of these incidents, a case was opened 
after a thorough investigation was completed by CBP and its Government 
partners and sufficient evidence was found to commence formal penalty 
proceedings.

    Senator Landrieu. But you all have been terrific. I want to 
excuse this first panel and then call up our second panel.
    Thank you very much.
    And if any of you all can stay around to hear the testimony 
of the second panel, that would be very helpful.
    Thank you.
    All right. To save time, let me introduce the second 
panel--Mr. Kristen M. Baumer of Paul Piazza & Son, Inc., of New 
Orleans; Eddy Hayes, partner of Leake & Andersson, professor of 
law at Tulane University; Keith Busse, chairman and CEO of 
Steel Dynamics--and I am going to have the ranking member 
introduce him more fully in a minute--and Jim Adams, Offshore 
Marine Service Association.
    All of you represent significant industries with 
significant experience in this area. We are particularly happy 
to have Tulane University present.
    And Senator, would you like to introduce your witness?
    Senator Coats. I would. I would like to welcome Keith 
Busse, chairman and chief executive officer of Steel Dynamics.
    Steel Dynamics is a company that Keith founded in 1993. It 
was an entrepreneurial venture. Under his leadership, it has 
grown to become the Nation's largest mini mill steel and metals 
recycling company. It employs about 7,000 people and has annual 
production exceeding 7 million tons.
    So it not only is a producer of needed material for our 
industries, but it is also a responsible citizen in terms of 
recycling used materials into forming this product.
    Prior to starting Steel Dynamics, he was associated with 
Nucor Corporation, which also is located primarily in Indiana, 
and successfully developed one of the largest flat-rolled steel 
production facilities in the United States.
    He has received numerous awards, and I am glad that he 
could be here to testify for us today about some of the trials 
and travails of being in an industry when you are competing 
against someone that is breaking the law and using unfair 
practices. So welcome to him and the rest of the panelists.
    Thank you very much.
    Senator Landrieu. Thank you.
    And let me just say for the Baumer family, I really 
appreciate your being here, and your family came from Sicily 
135 years ago. And your family has settled along the banks of 
the Mississippi River in New Orleans. We are so grateful for 
the work and the enterprise that you and your family have 
contributed all those years, and we are thrilled to have you 
this morning.
    So, Mr. Baumer, why don't we go ahead and start with you?
STATEMENT OF KRISTEN M. BAUMER, PRESIDENT, PAUL PIAZZA 
            & SON, INC., NEW ORLEANS, LOUISIANA
    Mr. Baumer. Thank you, Madam Chair.
    Madam Chair and Ranking Member Coats, thank you for the 
opportunity again to testify before you today.
    My name is Kristen M. Baumer, as you said, and I am the 
president of Paul Piazza & Son, which is a fourth-generation, 
family-owned Louisiana shrimp processing and wholesale 
distribution company, which was established in 1892.
    About 135 years ago, Paul Piazza left his home in Sicily 
when he was 15 years old with dreams of a better life for 
himself and his family. He supported himself by walking the 
streets of New Orleans, selling shrimp from a basket on his 
back.
    Later, that basket became a horse-drawn wagon. Shortly 
thereafter, he established Paul Piazza & Son in the French 
Market with his son, my grandfather, Vincent Rene Piazza. 
Through honesty, integrity, dedication, and hard work, combined 
with consistent quality domestic shrimp products from our gulf 
fishermen, my great-grandfather, my grandfather, as well as my 
father and uncle, transformed Paul Piazza & Son into one of the 
largest domestic shrimp processors and distributors in the gulf 
today.
    Currently, we are processing, inventorying, and supplying 
many food service companies and retail grocery store chains 
throughout the United States, as well as our Nation's military, 
with approximately 20 million pounds of domestic shrimp each 
year.
    As you know, the shrimp industry contributes about $1 
billion annually to Louisiana's economy. The industry is 
responsible for employing thousands of hard-working Louisiana 
citizens in shrimp harvesting and related production and 
distribution activity.
    The gulf shrimp industry has survived hurricanes and the 
gulf oil spill. But perhaps the most dire and sustained threat 
we have ever faced has been unfair competition from imported 
shrimp. Nearly 90 percent of the shrimp consumed in this 
country is imported, which makes our industry particularly 
vulnerable if that imported shrimp is not traded fairly.
    In 2003, our industry was in crisis. A massive wave of 
foreign shrimp was being dumped into our market at less than 
fair value, driving down prices, eating into our market share, 
and forcing our shrimp boats to tie up at the docks.
    The industry took action. We invested an enormous amount of 
time, effort, and resources to obtain AD orders on shrimp from 
six countries. Duties redistributed to the affected domestic 
industry under CDSOA have allowed many of us to regroup and 
rebuild after being hammered by dumped imports, successive 
hurricanes, and the gulf oil spill.
    These duties have also allowed processors like Paul Piazza 
& Son to pass on dockside prices that allow our fishermen to 
keep trawling the waters they have fished for generations, 
despite rising fuel prices.
    Unfortunately, much more needs to be done to ensure these 
orders are actually restoring conditions of fair trade to our 
market. Foreign producers and importers have gone to 
extraordinary lengths to evade the duties they owe, greatly 
undermining the effectiveness of the orders we fought so hard 
to obtain.
    Their actions fall into three categories--one, the 
nonpayment of duties; two, transshipment of shrimp through 
countries not covered by the orders; and three, 
misclassification of covered shrimp as product not covered by 
the orders.
    The nonpayment of duties is the most well-documented of the 
three. Since the orders were imposed in 2005, shrimp importers 
have failed to pay more than $75 million in duties they owe to 
the U.S. Government. This is a massive problem that is not 
limited to shrimp alone.
    Another iconic Louisiana industry, crawfish, has also 
suffered with more than $560 million in AD duties that remain 
unpaid. In all, Customs has been unable to collect more than 
$1.5 billion in AD/CVDs since 2001. It means that $1 out of 
every $3 of unfair trade duties due to our Government are 
simply not being paid.
    Our trade remedy laws provide for our industry first and 
often the only line of defense for American companies, farmers, 
fishermen, and workers when they are forced to compete with 
dumped and subsidized imports. We are very grateful to Senator 
Landrieu for her championship on this important issue, and we 
look forward to working with the subcommittee to finally fix 
this hole in our trade remedy system.

                           PREPARED STATEMENT

    I look forward to any questions that you may have after 
everyone speaks.
    [The prepared statement follows:]
                Prepared Statement of Kristen M. Baumer
    Madam Chairman, Ranking Member Coats, members of the subcommittee, 
thank you for the opportunity to testify before you today. My name is 
Kristen M. Baumer, and I am the president of Paul Piazza & Son, Inc., a 
fourth-generation, family-owned Louisiana shrimp processing and 
wholesale distribution company which was established in 1892.
    There is a lady who stands tall in New York harbor with a message 
which says, ``Give me your tired, Your poor, Your huddled masses 
yearning to breathe free  . . .  I lift my lamp beside the golden 
door.'' Many of our ancestors heeded the call of the Lady of Liberty, 
and found their destiny on the golden shores of America. My great 
grandfather, Paul Piazza, was no exception.
    Approximately 135 years ago, Paul Piazza left his home town in 
Sicily when he was 15 years old with dreams of a better life for 
himself and his family, and landed near the banks of the Mississippi 
River, in New Orleans, Louisiana. He supported himself by walking the 
streets of New Orleans selling shrimp from a basket on his back. Later, 
that basket became a horse-drawn wagon selling seafood. Shortly 
thereafter, he established Paul Piazza & Son, as an open marketplace in 
the French Market with his son, my grandfather, Vincent ``Rene'' 
Piazza. They would buy seafood from local fishermen to distribute to 
local restaurants and markets. Through honesty, integrity, dedication, 
and hard work, combined with consistent quality domestic shrimp 
products, my great grandfather, my grandfather, as well as my father 
and uncle, transformed Paul Piazza & Son, Inc. into one of the largest 
domestic shrimp processors and distributors in the gulf south.
    Today we process, inventory, and supply many foodservice companies 
and retail grocery stores throughout the United States, as well our 
Nation's military, with approximately 20 million pounds of domestic 
shrimp each year. Yet, we very much remain a family business 
headquartered in New Orleans, Louisiana. I run the business along with 
my brother Shep and brother-in-law, Kory, and the many valued employees 
of our company, many of whom have been with our company since I was a 
small child.
    Personally, I worked in the business during my high school and 
college years. After law school and 10 years in the legal profession, I 
returned to our family's business to help rebuild our company after 
Hurricane Katrina destroyed millions of dollars in inventory and nearly 
collapsed our business. Through the hard work of our extended family, 
the hard work and sweat of our gulf fishermen, and the protection and 
financial support we have received from the Continued Dumping and 
Subsidy Offset Act of 2000 (CDSOA), Paul Piazza & Son, Inc. has 
continued to process and sell domestic shrimp to the citizens of our 
country. We have also taken a leadership role in protecting and 
preserving our domestic shrimp industry despite the many challenges 
posed by imported seafood. I have been an active board member with the 
Louisiana Seafood Marketing and Promotion Board and Louisiana Shrimp 
task force, as well as an active member of the American Shrimp 
Processors Association.
    The shrimp industry contributes about $1 billion annually to 
Louisiana's economy. The industry is also responsible for employing 
thousands of hard-working Louisiana citizens in shrimp harvesting and 
related production and distribution activity. Shrimping is a way of 
life for many of Louisiana's citizens. In most cases, shrimping 
operations are small, family-run businesses, and many fishermen's 
families have been trawling the same waters for generations.
    The gulf shrimp industry has survived Hurricanes Katrina, Rita, and 
Ike, and the gulf oil spill, but perhaps the most dire threat we have 
ever faced has been unfair competition from imported shrimp. Nearly 90 
percent of the shrimp consumed in this country is imported, which makes 
our industry particularly vulnerable if that imported shrimp is not 
traded fairly. In 2003, our industry was in crisis. A massive wave of 
foreign shrimp was being dumped in our market at less than fair value, 
driving down prices for the rest of us and eating into our market 
share. As a result, many of our shrimp boats were forced to simply tie 
up at the docks because they could not afford to go out and harvest.
    The industry took action. We invested a huge amount of time, 
effort, and resources to obtain anti-dumping (AD) orders on shrimp from 
six countries:
  --Brazil;
  --China;
  --Ecuador;
  --India;
  --Thailand; and
  --Vietnam.
These are some of the most economically important orders to be imposed 
in recent years--in 2005, when the orders were imposed, shrimp imports 
from these six countries totaled $1.7 billion.
    Without these orders, I doubt our industry would have survived the 
past 6 years. They stopped the downward spiral in prices and stabilized 
the market. While dumping has continued, duties collected under the 
orders have imposed needed price discipline on importers. In addition, 
duties redistributed to the affected domestic industry under the CDSOA 
have allowed many of us to regroup and rebuild after being hammered 
first by dumped imports, then by successive hurricanes, and last year, 
by the gulf oil spill.
    Unfortunately, much more needs to be done to ensure these orders 
are actually restoring conditions of fair trade to our market. Foreign 
producers and importers have gone to extraordinary lengths to evade the 
AD duties they owe, greatly undermining the effectiveness of the orders 
we fought so hard to obtain. Their actions fall into three general 
categories:
  --the nonpayment of duties;
  --transshipment of shrimp through countries not covered by the 
        orders; and
  --misclassification of covered shrimp as product not covered by the 
        orders.
    The nonpayment of duties is the most well-documented of the three 
enforcement problems. Since the orders were imposed in 2005, shrimp 
importers have failed to pay more than $75 million in duties they owe 
to the U.S. Government. China is by far the biggest source of the 
problem, accounting for 78 percent of the unpaid duties on shrimp, and 
93 percent of the unpaid duties on seafood imports overall. When these 
duties go uncollected, it means that unfairly dumped shrimp is being 
allowed to enter our market with no price discipline. It also deprives 
the U.S. Government of revenue it is owed. In addition, to the extent 
the duties were owed on imports covered by CDSOA, it has robbed our own 
industry of part of the compensation it was owed under the law.
    This is a massive problem that is not limited to shrimp alone. 
Another iconic Louisiana industry, crawfish, has also suffered--
crawfish importers have failed to pay more than $560 million in AD 
duties they owe. In all, Customs has been unable to collect more than 
$1.5 billion in AD and countervailing duties (CVDs) since 2001. This is 
a staggering amount. It means that $1 out of every $3 of unfair trade 
duties due to our Government are simply not being paid at all.
    We are very grateful to Senator Landrieu for her championship on 
this important issue, which is of great concern not only to the shrimp 
and seafood industries but to the many domestic producers across our 
country who have been irreparably harmed by nonpayment of duties. We 
look forward to working with the subcommittee to finally fix this 
gaping hole in our trade remedy system.
    Foreign producers and importers further undermine our trade relief 
through transshipment and misclassification. We applaud Customs for the 
work they have done to uncover and prosecute these fraudulent schemes, 
but they need more tools and more resources to prevent these schemes 
from weakening our trade laws.
    In 2005, for example, Customs discovered that more than $6 million 
in shrimp from China had been illegally transshipped through Indonesia 
to avoid AD duties, and Customs recovered more than $2 million in 
duties owed on this shrimp. Unfortunately, those duties were not 
collected until late 2007, after the shrimp had already entered the 
market at dumped prices and the harm had been done. In 2007, Customs 
also found Chinese shrimp being transshipped through Malaysia to avoid 
an FDA import alert regarding the presence of unapproved drugs in 
seafood from China. Such evasion is particularly troubling given that, 
according to a Government Accountability Office report released last 
month, only a mere 0.1 percent of all seafood imports from countries 
not under an import alert are tested by the FDA for banned drug 
residues.
    Another example concerns so-called ``dusted'' shrimp, shrimp that 
is coated with flour but not fully breaded. In 2007, Customs sampled 
shrimp being entered as ``dusted'' product from China, which at that 
time was not subject to the AD order, and found that a full 64 percent 
of the sampled shipments did not in fact qualify as dusted shrimp and 
should have been entered under the order. While Customs estimated that 
the duties potentially due on the sampled shipments were about $5 
million, the total loss in AD duties, assuming a similar rate of fraud 
going back to the issuance of the orders, was estimated at more than 
$130 million.
    While these enforcement actions by Customs have sent a needed 
signal to importers that they will be held accountable for such 
fraudulent schemes, we need more tools and resources that allow Customs 
to collect duties more quickly, anticipate risks proactively, share 
information more openly, and keep such fraudulent imports out of our 
market in the first place. Otherwise, the relief is often too little, 
too late for the domestic industry.
    Our trade remedy laws provide the first, and often the only, line 
of defense for American companies, farmers, fishermen, and workers when 
they are forced to compete with dumped and subsidized imports. The 
Congress created these laws to ensure that opening the doors of foreign 
commerce does not unfairly distort the playing field for U.S. 
industries here at home. A healthy trade remedy regime is key to 
continued domestic support for our engagement in the global economy. 
But these laws mean little if they are not vigorously enforced. I hope 
this hearing will be a first step towards strengthening that 
enforcement and fulfilling the promise of our trade remedy laws.
    I thank the subcommittee for the opportunity to testify today and 
for your interest in this important issue. I look forward to any 
questions you may have.

    Senator Landrieu. Thank you, Mr. Baumer. I appreciate it.
    Mr. Hayes.
STATEMENT OF EDDY HAYES, PARTNER, LEAKE & ANDERSSON, 
            AND PROFESSOR, TRADE POLICY, TULANE LAW 
            SCHOOL, NEW ORLEANS, LOUISIANA
    Mr. Hayes. Thank you, Madam Chair, Ranking Member Coats.
    My name is Eddy Hayes, and I am a partner at the law firm 
of Leake & Andersson in New Orleans. I lead the firm's 
international trade and business practice, and I also am proud 
to serve as an adjunct professor at Tulane Law School and at 
Loyola Law School, where I teach a seminar on international 
trade. I am also very proud to be counsel to the American 
Shrimp Processors Association.
    On a personal note, Senator Landrieu, I wanted to say thank 
you for everything that you have done not just for this 
industry, but for our citizens and our State. We have had a 
wild ride since 2005, and I can tell you, we all feel better 
that you are up here being our champion.
    So thank you, Senator Landrieu.
    As Mr. Baumer just testified, the shrimp industry has seen 
the damaging effects of duty evasion, transshipment, and 
circumvention firsthand. Duty nonpayment in the shrimp industry 
alone has deprived the U.S. Government of more than $75 million 
in tariff revenue and more than $1.5 billion in tariff revenue 
overall since 2001.
    These problems have seriously compromised the integrity of 
the trade relief that this industry fought so hard to obtain. 
If the IRS had only collected $2 out of every $3 it was owed, 
it would be on the front page of every newspaper, and rightly 
so. And we believe this issue demands the same measure of 
attention.
    We are deeply appreciative of all the support the industry 
has received from this subcommittee, including the powerful 
testimony that both Madam Chair Landrieu and Senator Cochran 
provided to ITC in its recent sunset review of the AD orders on 
shrimp.
    Now that the commission has voted to keep these orders in 
place, it is the perfect opportunity to ensure that the full 
measure of AD orders are realized and that the relief intended 
under the law is provided to the members of the shrimp 
industry.
    Madam Chair Landrieu, as the commission voted to maintain 
these orders, you rightly noted that the next step was to 
ensure that all the duties owed under the orders were, in fact, 
being paid. And we could not agree more that that is the next 
logical step.
    Importers of goods under an AD or CVD order generally have 
to post cash deposits equal to the estimated dumping or subsidy 
margin for those goods. Because the final duty liability may be 
higher than this cash deposit amount, importers are also 
required to post a bond in addition to their cash deposits.
    New exporters are allowed to post bonds instead of cash 
deposits while they seek reviews to establish their own dumping 
margins. Unfortunately, the bonds that are currently required 
in these situations are simply not sufficient to allow Customs 
to collect the full amount of duties owed. In some cases, the 
importer is nothing more than a P.O. box, and there is no way 
to collect against the importer at all.
    Customs is then forced to try and collect against the 
entity, most oftentimes a surety that provided the bond. But 
when the importers are only required to obtain a continuous 
entry bond, rather than the more robust single entry bond, then 
the bond is often inadequate to capture the full amount of 
dumping and the revenue that is due to the United States.
    This problem is particularly acute for agriculture and 
aquaculture products, where fragmentation in the foreign 
industries allows players to appear and disappear at whim and 
often without a trace. Seafood alone accounts for 43 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.
    Now, to its credit, Customs has tried to address the 
problem in these industries with enhanced bonding requirements. 
Though those particular requirements have been struck down, we 
believe it is possible to reintroduce those requirements in a 
consistent manner with our obligations both domestically and 
internationally.
    For example, whenever the amount of uncollected duties 
exceeds a certain monetary threshold, for example, $1 million, 
then Customs could require that the importers post a more 
robust single entry bond. Furthermore, we should not allow an 
importer to continue posting the same security after DOC has 
preliminarily found that a higher margin is likely to apply or 
while a final DOC determination is under appeal. Instead, 
importers should have to start posting a sufficiently high bond 
to meet those increased margins shortly after those 
determinations.
    And finally, the Congress should eliminate the privilege 
that new shippers have to post bonds rather than cash deposits 
as they await the results of their new shipper reviews. I 
believe these three changes would go a very long way to 
plugging the holes through which far too many importers escape 
their duty liability. These changes will ensure this 
inexcusable behavior is not allowed to continue.

                           PREPARED STATEMENT

    We also support the proposals put forth by your colleague 
Senator Wyden and others to give Customs the tools it needs to 
more effectively address these issues of transshipment, 
misclassification, circumvention, and duty evasion. And I am 
happy to answer any questions that the Madam Chair and the 
ranking member have.
    [The prepared statement follows:]
                    Prepared Statement of Eddy Hayes
    Madam Chairman, Ranking Member Coats, members of the subcommittee, 
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 and Loyola University Law School, where I 
teach a seminar on international trade law and practice. I also 
represent the city of New Orleans on the U.S. Trade Representative's 
Intergovernmental Policy Advisory Committee, and I serve on the roster 
of panelists eligible to adjudicate trade disputes under chapter 19 of 
the North American Free Trade Agreement.
    I am also counsel to the American Shrimp Processors Association, 
the largest national organization of shrimp processors. As Mr. Baumer 
just testified, this industry has seen the damaging effects of duty 
evasion, transshipment, and circumvention first-hand. Duty nonpayment 
in the shrimp industry alone has deprived the U.S. Government of more 
than $75 million in tariff revenue--and more than $1.5 billion in 
tariff revenue overall--since 2001. These problems have seriously 
compromised the integrity of the trade relief the industry has fought 
to obtain and maintain over the years.
    We are deeply appreciative of all of the support the industry has 
received from this subcommittee, including the powerful testimony that 
both Chairman Landrieu and Senator Cochran provided to the U.S. 
International Trade Commission in its recent sunset review of the anti-
dumping (AD) orders on shrimp. The Commission rightly decided that 
revocation of the orders would likely lead to a continuation or 
recurrence of material injury to the domestic shrimp industry, and 
voted to keep these orders in place. Now is the perfect opportunity to 
ensure that these orders are in fact providing the full measure of 
relief intended under the law.
    Chairman Landrieu, as the Commission voted to maintain these 
orders, you rightly noted that the next step was to ensure that all 
duties owed under the orders were in fact being paid. We could not 
agree more. As Mr. Baumer testified, importers have failed to pay more 
than $75 million in AD duties owed. As I noted, across all orders, such 
nonpayment has deprived the U.S. Government of more than $1.5 billion 
in revenue. If the Internal Revenue Service only collected $2 out every 
$3 tax 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.
    Importers of goods under an AD or countervailing duty (CVD) order 
generally must post cash deposits equal to the estimated dumping or 
subsidy margin for those goods. The actual margin of dumping or 
subsidization for the merchandise will often not be finalized until an 
administrative review is conducted by DOC, and sometimes, until 
judicial review of DOC's determination is complete. Because the final 
duty liability may be higher than the estimated margin covered by cash 
deposits, importers are also required to post a bond in addition to 
their cash deposits. In addition, a new exporter or producer may post a 
bond instead of cash deposits while it seeks a determination of its 
correct margin in a new shipper review.
    Unfortunately, the bonds that are currently 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 the ultimate 
duty liability increases over the preliminary estimate, or 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.
    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. Indeed, seafood alone accounts 
for a full 43 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.
    To its credit, Customs has tried to address the problem in these 
industries with enhanced bonding requirements. Unfortunately, those 
requirements were struck down because they singled out agriculture and 
aquaculture. But there is a way to make such requirements fully 
consistent with both U.S. law and our World Trade Organization 
obligations by ensuring they are based on an objective risk assessment 
rather than industry categories. For example, whenever the amount of 
uncollected duties under an order exceeds a certain fixed amount, say 
$1 million, Customs could require that importers post a more robust 
single entry bond, rather than the insufficient continuous entry bond, 
for imports under that order. Such a requirement would be industry- and 
country-neutral, easy to administer, and highly effective.
    Furthermore, we should not allow an importer to continue posting 
the same security after the Department of Commerce (DOC) has 
preliminarily found that a higher margin is likely to apply or while a 
final DOC determination that such a higher margin will apply is under 
appeal. Instead, importers should have to start posting a sufficiently 
high security to meet increased margins shortly after any preliminary 
DOC determination that the duty liability is likely to be higher than 
the cash deposit rates. The same obligation should apply if any final 
determination by DOC that finds a margin that is higher than the cash 
deposit rates is subsequently appealed. To facilitate this, DOC should 
be required to publish the amount by which the margins that apply to 
exporters in a preliminary or final determination exceed each 
exporter's cash deposit rates for the period reviewed.
    Finally, the Congress could change the law to eliminate the 
privilege new shippers currently enjoy to post bonds rather than cash 
deposits as they await the results of new shipper reviews. Importers of 
merchandise from new shippers should face the same cash deposit 
requirements as importers from other companies that have not received 
individual rates.
    These three changes would go a very long way towards plugging the 
holes through which far too many importers currently escape their duty 
liability. While they can't make our industries whole for the harm they 
have already suffered, these changes will ensure this inexcusable 
behavior is not allowed to continue. In addition, we believe it is 
entirely appropriate for these changes to originate from this 
subcommittee because they go directly to Customs' revenue-raising 
authority.
    As to the problems of transshipment, misclassification, 
circumvention, and other schemes, we believe it is time to supplement 
Customs' toolkit so it can act with the speed, flexibility, and 
transparency that modern commerce demands. As Mr. Baumer testified, too 
often enforcement efforts such as civil fraud cases, penalty 
collections, and criminal prosecutions take far too long to have a 
meaningful impact on the market. In addition, the legal threshold for 
initiating such investigations is a high one, and such cases are 
resource-intensive.
    While these enforcement actions play an important role, more is 
needed. Numerous helpful proposals have been put forward that would 
give Customs needed new enforcement tools, including by Senator Wyden 
and some of his colleagues. We are supportive of Senator Wyden's 
proposals and believe them consistent with the ideas proposed below.
    First, Customs should suspend liquidation of entries as soon as 
there is a reasonable indication that goods which may be subject to an 
order are not being properly entered under that order. The burden 
should be on the importer, not on Customs, to substantiate claims 
regarding the origin, physical properties, and value of the 
merchandise. While these claims are being verified, entries would be 
held in suspension. If an importer cannot substantiate its claims, 
Customs should be able to apply an adverse inference that the goods are 
in fact subject to the order, and assess duty liability accordingly. 
Similar procedures at DOC create a strong incentive for foreign 
producers to cooperate and provide requested information, and the same 
would hopefully be true at Customs. These actions would be separate 
from, and in addition to, any civil or criminal proceedings against the 
importer.
    Second, the ability of Customs to share useful information with 
those who have the most vested interest in enforcing our trade laws--
the domestic industry--is currently hampered by legal restrictions such 
as the Trade Secrets Act. At DOC, the ability of domestic parties to 
access foreign producers' confidential business information under 
administrative protective orders has proven invaluable; it permits the 
domestic industry to provide targeted, specific information to DOC, 
eases the Department's own investigative burden, and helps to keep 
respondents honest, all while protecting confidential information. 
Similar procedures should be available at Customs. In addition, Customs 
should 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.
    Third, there should be more robust information sharing between 
Customs and DOC. When Customs conducts the type of verification 
outlined above, it should forward the resulting information to DOC so 
it can be part of its own record, and so that parties to the DOC 
proceeding can access that information under protective order. 
Similarly, parties should be allowed to share confidential information 
learned in a DOC proceeding with Customs. If, for example, Customs 
suddenly sees a large increase in imports claiming to originate from a 
foreign producer that recently received a relatively low margin, 
information learned in the DOC proceeding may demonstrate that the 
foreign producer has nowhere near the capacity to produce such a high 
volume of imports, and that they are in fact being fraudulently shipped 
from foreign producers subject to much higher margins. Interested 
parties should be able to alert Customs to such information without 
violating their confidentiality obligations.
    Fourth, Customs must be allowed to use the full range of 
information it currently collects from importers for trade enforcement 
purposes. In 2009, Customs began requiring importers to submit 
additional information regarding cargo shipments on their way to our 
ports, the so-called ``10+2'' requirements. The information is 
collected for smuggling and security purposes, and it includes the 
identity of the seller, the buyer, the manufacturer, the party being 
shipped to, the country of origin, the applicable tariff line, where 
the container was loaded, and the identity of the consolidator. This 
information is already being collected on all cargo shipments to the 
United States, yet Customs is prohibited from using this information 
for trade enforcement purposes. By eliminating this needless wall 
between security and trade enforcement, we could give Customs access to 
a huge amount of extremely useful information at no extra cost to the 
taxpayer and with no additional burden on importers.
    Finally, in this time of acute fiscal pressures, we understand that 
any request for increased funding is a hard sell. But at Customs, the 
funds invested bring a concrete revenue return back to the Government, 
and they are thus money well spent. At a minimum, we should ensure that 
Customs is not being deprived of the appropriations it needs to protect 
the tariff revenue and to ensure the integrity of our trade remedy 
laws. The losses due to unpaid duties alone exceed $1.5 billion over 
the past 10 years; it is impossible to quantify the additional amounts 
lost to transshipment, circumvention, misclassification, and other 
schemes.
    I thank the subcommittee 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.
    Mr. Busse.
STATEMENT OF KEITH BUSSE, CHAIRMAN AND CEO, STEEL 
            DYNAMICS, INC., FORT WAYNE, INDIANA
    Mr. Busse. Good morning, Madam Chair Landrieu, Senator 
Coats, and members of the subcommittee.
    I am Keith Busse, co-founder, chairman, and CEO of Steel 
Dynamics, Inc. (SDI). We began operations in Butler, Indiana, 
with one greenfield mini mill in the year 1996. We now have 
five mills in three States with more than 6,000 employees 
dedicated to steel making and recycling.
    We produce flat-rolled steel, special bar quality steels, 
rebar rail structurals, and we gather, process, and distribute 
scrap. We recently began producing pig iron from iron ore oxide 
at our Mesabi Nugget plant in Hoyt Lakes, Minnesota, and will 
soon begin a joint venture with a Spanish entity to produce 
copper rod.
    Thank you for inviting me to discuss a paramount issue for 
U.S. manufacturers, specifically our trade laws and the proper 
enforcement of existing dumping orders. Testimony this morning 
from CBP, ICE, DOC, and GAO showed that much work remains to 
ensure that custom fraud ends.
    Our expansion and continued investment in new technologies, 
products, and employment in the United States faces one major 
headwind, China. The Chinese Government has subsidized a steel 
industry with 800 million tons of capacity and only 675 million 
tons of domestic demand. The 125 million tons of excess 
capacity is pouring onto world markets, as China is the world's 
largest steel exporter.
    This exists because the Chinese Government manipulates the 
value of its currency to provide export subsidies. The United 
States should address this issue immediately because it is 
costing us millions of jobs. However, I know that this is not 
the subject of today's hearing.
    In 2000, SDI and others obtained AD duties on imports of 
hot-rolled steel from China. In the past few years, many of our 
most important customer groups, including the pipe and tube 
industry, wire products producers, and steel wheel producers, 
have won AD/CVD orders against China or are now seeking them.
    But a new industry has sprung up in China to evade duties 
by creating false country of origin documents and transshipping 
those Chinese products through third countries. Customs' 
present inability to stop this massive invasion is harming us 
and the American worker.
    I would like to offer three recommendations to you. First, 
the Congress has to ensure that DHS is accountable for 
investigating and determining whether AD/CVDs are being evaded. 
Both DOC and ITC have statutory timelines in place that require 
them to publish results. I understand that no similar rules 
apply to Customs investigations of allegations of duty evasion.
    Therefore, I would urge you to support the bipartisan 
efforts of Senators Wyden and Snowe and their colleagues to 
establish a new statutory system to initiate, investigate, and 
reach conclusions about duty evasion within a defined 
timeframe.
    Second, and this is where this subcommittee has a direct 
impact, clearly, DHS will need separate funding through a fresh 
appropriations for establishing an office to process 
administrative protective orders and additional personnel to 
investigate duty evasion and collect AV and CVDs. These 
expenditures will pay for themselves, as millions of dollars of 
duties are recouped through collections by CBP.
    If these duties are collected, then U.S. producers will 
finally receive the relief intended from the imposition of 
duties under U.S. law. This will improve conditions for 
manufacturers, who will re-enlist workers and contribute to our 
economic recovery in communities throughout the country.
    Third, I understand that when textile quotas were put in 
effect, Customs had production verification teams that would go 
to foreign countries to investigate whether clothing was made 
in the factories they were alleged to be made in or they were, 
in fact, Chinese. The same thing should now be done with AD/CVD 
orders since importers claim the imports are from Malaysia, 
Vietnam, Taiwan, Hong Kong, Turkey, you name it, even though 
these products are made in China.
    Evidently, the State Department would have to work out 
memorandums of understanding with countries to allow these 
production verification teams to do their work. But I would 
emphasize that this would be an important step in intervention.

                           PREPARED STATEMENT

    Let me conclude by telling you that our board is 
considering an investment of $1.5 billion in a new greenfield 
mini mill to make flat-rolled steel primarily for tube and line 
pipe, mainly used to drill and transport oil and gas from new 
shale drilling sites around the country. This could create 
thousands of new jobs, but we need your help to stop the 
Chinese invasion of AD/CVD orders on these products. America 
must be prepared to secure the integrity of our ports.
    Thank you.
    [The prepared statement follows:]
                   Prepared Statement of Keith Busse
    Good Morning Chairman Landrieu, Senator Coats, and members of the 
subcommittee. I am Keith Busse, co-founder, chairman, and CEO of Steel 
Dynamics. We began operations in Butler, Indiana with one greenfield 
mini mill in 1996. We now have five mills in three States with more 
than 6,000 employees in steel and recycling. We produce flat-rolled 
steel, SBQ bars, rebar, rail, structurals, and we gather, process, and 
distribute scrap. We recently began producing pig iron from iron ore at 
our Mesabi Nugget plant in Hoyt Lakes, Minnesota and we will soon begin 
a joint venture with a Spanish entity to produce copper rod.
    Thank you for inviting me to discuss a paramount issue for U.S. 
manufacturers--our trade laws and the proper enforcement of existing 
dumping orders. Testimony this morning from Customs and Border 
Protection (CBP), Immigration and Customs Enforcement (ICE), the 
Department of Commerce (DOC), and the General Accountability Office 
(GAO) showed that much work remains to ensure that customs fraud ends.
    Our expansion and continued investment in new technologies, 
products, and employment in the United States faces one major headwind: 
China. The Chinese Government has subsidized a steel industry with 800 
million tons of capacity and only 675 million tons of domestic demand. 
That 125 million tons of excess capacity is pouring on to world markets 
and China is the world's largest steel exporter. This exists because 
the Chinese Government manipulates the value of its currency to provide 
export subsidies. The United States should address this issue 
immediately because it is stealing millions of jobs from us. However, I 
know that is not the subject of today's hearing.
    In 2000, SDI and others obtained anti-dumping (AD) duties on 
imports of hot-rolled sheet from China. In the past few years, many of 
our most important customer groups including the pipe and tube 
industry, wire products producers, and steel wheels producers have won 
AD and countervailing duty (CVD) orders against China, or are now 
seeking them. But, a new industry has sprung up in China to evade trade 
relief by creating false country of origin documents and the 
transshipping of Chinese products through third countries. Customs' 
present inability to stop this massive evasion is harming us and our 
workers.
    I would like to offer three recommendations to you. First, the 
Congress has to ensure that the Department of Homeland Security is 
accountable for investigating and determining whether AD/CVDs are being 
evaded. Both DOC and the U.S. International Trade Commission have 
statutory timelines in place that require them to publish results. I 
understand that no similar rules apply to Customs investigations of 
allegations of duty evasion. Therefore, I urge you to support the 
bipartisan efforts of Senators Wyden and Snowe and their colleagues to 
establish a new statutory system to initiate, investigate, and reach 
conclusions about duty evasion within a defined timeframe.
    Second, and this is where this subcommittee has a direct impact. 
Clearly, Homeland Security will need separate funding through 
appropriations for establishing an office to process administrative 
protective orders, and additional personnel to investigate duty evasion 
and collect AD/CVDs. These expenditures will pay for themselves as 
millions in dollars of duties are recouped through collections by CBP. 
If these duties are collected, then U.S. producers will finally receive 
the relief intended from the imposition of duties under U.S. law. This 
will improve conditions for manufacturers who will re-enlist workers 
and contribute to economic recovery in communities throughout the 
country. Third, I understand that when textile quotas were put into 
effect, Customs had production verification teams that would go to 
foreign countries to investigate whether clothing was made in the 
factories that they were alleged to be made in, or they were in fact 
Chinese. The same thing should now be done with AD/CVD orders since 
importers claim the imports are from Malaysia, Vietnam, Taiwan, Hong 
Kong, Turkey--you name it--even though these products are made in 
China. Evidently, the State Department would have to work out 
memorandums of understanding with countries to allow these production 
verification teams to do their work, but I would emphasize that this 
would be an important step in intervention.
    Let me conclude by telling you that our board has preliminarily 
allotted $1.5 billion for a new greenfield mini mill to make flat-
rolled steel primarily for tube and line pipe mainly used to drill and 
transport oil and gas from new shale drilling sites around the country. 
This could create thousands of new U.S. jobs, but we need your help to 
stop Chinese evasion of AD/CVD orders on these products. America must 
be prepared to secure the integrity of our ports. Thank you.

    Senator Landrieu. Thank you.
    And thank you for raising the issue of production 
inspection teams. We are going to focus on that, and I will 
have a few questions to you all and also the previous panel.
    Mr. Adams.
STATEMENT OF JIM ADAMS, PRESIDENT AND CEO, OFFSHORE 
            MARINE SERVICE ASSOCIATION, NEW ORLEANS, 
            LOUISIANA
    Mr. Adams. Good morning. Madam Chair, Ranking Member Coats, 
thank you so much for this opportunity.
    As president of the Offshore Marine Service Association 
(OMSA), I am pleased to testify on the need for disciplined, 
consistent, transparent enforcement of the Jones Act. OMSA 
represents more than 250 companies, and you know most of them 
and know our board members.
    Our members need consistent Jones Act enforcement. But they 
are also a resource. You know them well, and they can be the 
eyes and ears on the gulf for both CBP and the Coast Guard, and 
I would like to talk about how we can get more out of that 
partnership.
    The Jones Act is very broad, and it is very clear. It 
requires that to transport goods domestically, that that move 
needs to be made on a U.S.-built boat owned by Americans and 
crewed with American crew members. Foreign vessels are 
prohibited from engaging in coast-wide trade.
    Ensuring foreign vessels stay in their nontransportation 
lane is the responsibility of CBP and the Coast Guard. The need 
for clear, consistent, vigorous enforcement is essential to our 
members. It is really what the basis of the capital formation 
and the jobs that go along with that capital formation are 
built upon.
    But it is not an easy job. In contrast to a typical 
container ship move, a conventional move, in the Outer 
Continental Shelf (OCS), things are very complex. The OCS is a 
vast subsea network of wells and pipelines and equipment, and 
it is very foreign-looking to the average American. In this 
environment, it really takes a seasoned eye to differentiate 
between what is transportation service and what might be an 
installation or construction service.
    In the past 30 years, the complexity of the OCS has driven 
CBP down a very difficult and piecemeal path of letter rulings 
that have fostered uncertainty in our market, and you can be 
sure that foreign vessel operators have done their best to 
exploit the ambiguity that remains in the rules.
    In 2009, CBP courageously attempted to make broad policy 
improvements. But under intense political pressure to protect 
the status quo, CBP had to withdraw its rulemaking. I would 
like to thank CBP for that effort, and I remain confident that 
their acknowledgment that broad policy change was warranted, 
that acknowledgment will affect future letter rulings, as well 
as the enforcement posture of the agency.
    Again, enforcing the Jones Act on the OCS is a difficult 
job. Violations occur far offshore and at private docks. In 
2008--you know our members, they are self-starters--they 
created the Jones Act Compliance Program. Under this program, 
we have been assisting CBP and the Coast Guard with enforcement 
of all of our domestic transportation laws.
    We work closely with the CBP port directors to provide them 
with training, to give them the latest understanding of where 
technology is going, what they might expect to see occurring at 
various docks, and to understand what operations are going on. 
Using the Automatic Identification System, OMSA continually 
monitors the location and movements of every foreign vessel 
operating in the gulf.
    This surveillance, coupled with an aggressive intelligence 
program, allows OMSA to identify suspicious behavior. Then we 
take that intelligence and documented vessel movement data, and 
we provide it to CBP and help them build a case. This is an 
excellent example of what maritime domain awareness really is, 
and we would love to share this information with the Coast 
Guard so that we can not only do this for economic interest 
reasons, but also for Homeland Security.
    OMSA has assisted CBP in eight enforcement cases. Six of 
those are going to the fine assessment phase. Two of them were 
immediately rectified with compliance. As soon as we get 
compliance, a particular job will go to a U.S. flag boat and 
that work will go to U.S. crewmen.
    When a violation occurs, the penalty is the value of the 
cargo moved. In the six pending cases, the value of the cargos 
moved is between $2.5 million and $10 million. We strongly 
encourage CBP to take immediate action and assess a penalty. We 
understand they are very close on a couple of these cases.
    We think, with a strong penalty, that will provide the 
market clarity necessary for companies to understand what is at 
risk when they make a move of convenience possibly.
    Senator Landrieu. Okay. Try to wrap up, if you can?
    Mr. Adams. Yes, I will.

                           PREPARED STATEMENT

    Just before closing, thank you so much for your leadership 
in trying to get permits awarded in the gulf. We are at a 
critical stage. Our industry is being decapitalized, and our 
world-class workforce is being displaced.
    But thanks to your leadership, we may see improvement in 
the near future. I certainly hope so.
    [The prepared statement follows:]
                    Prepared Statement of Jim Adams
    Madam Chairman and members of the subcommittee: As the president 
and chief executive officer of the Offshore Marine Service Association 
(OMSA), I am pleased to have the opportunity to describe the challenges 
facing our industry and the Department of Homeland Security (DHS) 
through its agency, U.S. Customs and Border Protection (CBP), in 
enforcing the Jones Act in the Gulf of Mexico. The Jones Act is very 
broad and very clear in its mandate--no merchandise or passengers shall 
be transported by water between points in the United States in any 
other vessel than a vessel built in and documented under the laws of 
the United States and owned by persons who are citizens of the United 
States.
    OMSA represents more than 250 companies that own and operate 
vessels, perform towing activities and provide services in support of 
the production, exploration and development of offshore natural 
resources. These companies employ more than 12,000 mariners operating 
approximately 1,200 vessels in the Gulf of Mexico. Madam Chairman, in 
your visits to Port Fourchon and other port and offshore facilities in 
southeast Louisiana, you have observed firsthand the OMSA member 
vessels and personnel that support vital offshore oil and gas 
exploration and development operations. While our association 
represents the world's largest offshore vessel companies, most OMSA 
members are to this day family owned and operated businesses. Our 
members not only perform a valuable economic function for the oil and 
gas industry, but we also have an important homeland security role to 
play. Because we regularly operate within and beyond the maritime 
borders of the United States, OMSA members serve as ``an early-warning 
system'' for threats against the strategic assets in the Gulf of Mexico 
and our homeland.
    Madam Chairman, at the outset, I would like to provide the 
subcommittee with some important background on the Jones Act, a 
critically important law that is vital to the American maritime 
industry and our operations in the Gulf of Mexico. When the Jones Act 
was enacted by the Congress in 1920, its preamble provided that:

    ``It is necessary for the national defense and for the proper 
growth of its foreign and domestic commerce that the United States 
shall have a merchant marine of the best equipped and most suitable 
types of vessels sufficient to carry the greater portion of its 
commerce and serve as a naval or military auxiliary in time of war or 
national emergency, ultimately to be owned and operated privately by 
citizens of the United States; and it is declared to be the policy of 
the United States to do whatever may be necessary to develop and 
encourage the maintenance of such a merchant marine, and, insofar as 
may not be inconsistent with the express provisions of this act, the 
[United States] shall, in the disposition of vessels and shipping 
property as hereinafter provided, in the making of rules and 
regulations, and in the administration of the shipping laws keep always 
in view this purpose and object as the primary end to be attained.''

    While the Jones Act dates from 1920, cabotage laws from which it 
came were enacted by the first United States Congress in 1789. Through 
the Jones Act and its predecessor statutes, the Congress intended to 
ensure that the United States has available vessels to meet sealift 
needs, trained and experienced seafarers to operate U.S. Government 
ships in times of national emergency, and a modern shipyard industrial 
base that is critical to the Nation's military and economic security. 
In so doing, the Congress required that vessels operating in the 
domestic commerce of the United States must be owned by U.S. citizens, 
built in U.S. shipyards, crewed by U.S. citizens, and documented under 
the laws of the United States as U.S. flag vessels. CBP is vested with 
the authority to interpret and enforce these Jones Act requirements. 
Indeed, as the Preamble included by the Congress at the time of the 
passage of the Jones Act makes clear, it is the duty of CBP to ``keep 
always'' the stated purpose of the statute as the ``primary end'' to be 
attained. This means, and the Congress made clear, that when creating 
rules and regulations and when administering all shipping laws, of 
which the Jones Act is one, CBP must ``do whatever necessary to develop 
and encourage the maintenance of such a merchant marine''.
    Without a doubt, U.S. businesses have done their part in ensuring 
that our Nation has a vibrant merchant marine. The investment by 
American businesses, and members of OMSA, based on the Jones Act is 
substantial. According to America's Maritime Partnership, the entire 
Jones Act fleet is comprised of more than 40,000 vessels and represents 
an investment of nearly $30 billion. Jones Act vessels annually move 
more than 100 million passengers and 1 billion tons of cargo with a 
market value of $400 billion. There are 74,000 jobs that are directly 
related to Jones Act maritime activity, and total employment related to 
domestic waterborne commerce is 500,000. The annual economic impact of 
the industry is $100 billion, with $29 billion in annual wages paid and 
$11 billion in taxes generated. In addition to support for domestic 
offshore oil and gas activities on the Outer Continental Shelf of the 
United States (OCS), Jones Act vessels carry grain, coal and other dry-
bulk cargoes, crude, and petroleum products on the inland river system; 
domestic crude oil from Alaska to west coast refineries; iron ore, 
limestone and coal throughout the Great Lakes; refined petroleum 
products along the east and gulf coasts; and merchandise and 
construction materials to and from Alaska, Hawaii, Puerto Rico, and 
Guam.
    The segment of the industry that serves the Nation's oil and gas 
exploration and development on the OCS is a vital and indispensable 
part of the Nation's Jones Act fleet and its ability to competitively 
explore and produce domestic sources of oil and gas. Prior to the 
moratorium imposed by the administration on OCS drilling activities, 
the United States obtained almost a one-third of its oil and more than 
a quarter of its gas from offshore drilling and production.
    In addition to the importance of the oil and gas sector, the OCS 
may also be a significant future source of wind-generated electricity. 
Our members' vessels serve exploration, development, and production 
rigs and facilities and support offshore and subsea construction, 
installation, maintenance, repair and decommissioning activities. In 
addition to transporting deck cargo, such as pipe or drummed material 
and equipment, our vessels also transport liquid mud, potable and 
drilling water, diesel fuel, dry bulk cement, and personnel between 
shore bases and offshore rigs and production facilities.
    The need for clarity, consistent with legislative intent, and 
vigorous enforcement of the Jones Act by CBP is extremely important in 
the context of offshore oil and gas activities on the OCS. This issue 
is of even greater importance in the Gulf of Mexico where day-to-day 
operations have been significantly curtailed by the Administration's 
continuing de facto moratorium on offshore oil and gas drilling 
activities. In contrast to the relative simplicity of the 
transportation of merchandise from one place to another in other 
segments of the Jones Act trade, oil and gas exploration and 
development activities on the OCS are very complex. On the OCS, rapidly 
developing technology supports the installation of subsea wells and the 
myriad types of connecting pipes and other equipment necessary for the 
production of oil and gas. In the deepwater oil and gas fields, a new 
generation of special purpose and multipurpose vessels and equipment 
has been developed to facilitate operations. Subsea systems in 
deepwater often employ multiple wells connected to each other and 
production facilities with a wide variety of devices and patterns with 
such colorful names as ``daisy chain tiebacks'', ``cluster well 
manifolds'', and ``multi-well templates'' that can be miles long. 
Production facilities, fixed or floating, are connected to seabed 
systems by devices such as ``flexible compliant risers'', ``steel 
catenary risers'', ``tower risers'', and ``top tension risers''. 
Production structures vary depending on the depth of the water, and may 
run the gamut from platforms fixed to the seabed to moored floating 
production, storage and offloading vessels. There are at least four 
marine pipeline installation methods, including towing, S-lay, J-lay, 
and reel lay.
    This complexity in oil and gas activities on the OCS has taken CBP 
down a path of rulings based on specific and very complex fact patterns 
and situations that have unfortunately resulted in a lack of clarity 
and a misapplication of the law. Foreign vessel owners have exploited 
this ambiguity--and even promoted it--in order to create a market on 
the U.S. OCS for their vessels that should be reserved to Jones Act 
qualified vessels. Because of the complex, dynamic and rapidly changing 
environment on the OCS, the lack of clarity or failure to apply the 
Jones Act as intended by the Congress has created uncertainty, 
undermined enforcement, and opened the door to foreign carriers to 
inappropriately engage in the coastwise trade of the United States. In 
fact, this lack of clarity in the past in CBP rulings has allowed 
numerous foreign-flag vessels with foreign crews to carry on activities 
and transport cargo in the Gulf of Mexico, thereby costing OMSA members 
both jobs and revenue.
    In 2009, and with the full support of OMSA and its membership, CBP 
courageously initiated action to restore proper clarity to and 
enforcement of the Jones Act. Specifically, in its July 2009 proposed 
modification and revocation of certain previous Jones Act ruling 
letters, CBP sought to restore the definition of what constitutes 
vessel ``equipment'' as it relates to the transportation of merchandise 
under the Jones Act. CBP had revoked an earlier ruling that allowed a 
foreign-flag vessel to transport and install a wellhead assembly 
(commonly known as a ``Christmas tree'') from a U.S. port to the OCS, 
and the agency sought to impose clear and proper guidance to the trade 
community for compliance and to ensure that the legislative intent of 
the Congress is followed in the application of the Jones Act. However, 
to the great disappointment of OMSA and others in the Jones Act 
community, CBP, at the direction of the Department of Homeland 
Security, soon withdrew the modification and revocation proposal, and 
subsequent rulemaking proceedings in this matter have been abandoned 
for now.
    OMSA fully understands the difficulty of enforcing the Jones Act on 
the OCS, particularly given the size of the Gulf of Mexico and the 
complexity of OCS operations. Jones Act violations are often occurring 
far offshore or at remote private facilities. With this in mind, OMSA 
has taken steps to create a working partnership with CBP to assist in 
its enforcement of the Jones Act. And, I am pleased to report that our 
partnership is delivering positive results. I want to thank CBP for its 
commitment to this initiative and encourage CBP to continue its efforts 
to pursue swift enforcement when violations occur.
    In 2008, OMSA took the initiative to create a Jones Act compliance 
program with the express purpose of assisting CBP and the U.S. Coast 
Guard in enforcement of the Jones Act and other key maritime laws of 
the United States. Our members are operating throughout the Gulf of 
Mexico on a daily basis and are often able to see first-hand violations 
of the Jones Act by foreign flag vessels. In essence, the U.S.-flagged 
Jones Act fleet, in its role as an essential partner with DHS in the 
maritime homeland security mission, serves as the Nation's ``eyes and 
ears'' in the strategically vital OCS region.
    Under our Jones Act compliance program, OMSA works closely with CBP 
Port Directors and provides them with information and assistance to 
ensure a common understanding of the offshore industry's equipment, 
technology, operations, and terminology. Next, we actively monitor the 
location and movement of every foreign vessel in the Gulf of Mexico 
through the use of automated identification system technology. By 
continually documenting the location and activities of foreign vessels 
working in the Gulf of Mexico, OMSA is able to recognize vessel 
movements that warrant further scrutiny. We also have developed the 
capability to generate credible information about possible violations 
of the Jones Act from our experienced personnel working offshore. 
OMSA's Jones Act Compliance Manager regularly provides detailed 
enforcement reports to CBP that enable the Federal Government to pursue 
those companies and individuals that are actively violating the Jones 
Act.
    As a result of this program and the information that OMSA has 
provided to CBP, there have been numerous enforcement actions 
successfully initiated. In fact, there have been eight enforcement 
cases in the past few years that are progressing towards a fine or have 
been otherwise resolved by CBP with full compliance by the foreign 
shipowner. In order for its enforcement efforts to be credible and 
deter future violations by foreign flag shipowners, we encourage CBP to 
act quickly and decisively to impose fines and other sanctions when a 
violation is found, and to widely publish such enforcement actions. We 
are confident that with the assessment of a few significant penalties, 
there will be a marked change in the inappropriate activities of 
certain foreign flag vessels in the Gulf of Mexico. As a result, more 
opportunities for U.S. flag vessels and American crews will be created.
    Madam Chairman, the members of OMSA are proud to support the 
efforts to develop the oil and gas resources of this Nation. We have 
made a substantial investment in this enterprise and are prepared to 
increase that investment. Our investments in the past have been 
predicated on the continuing viability of the Jones Act and the 
expectation that the Federal Government will aggressively enforce that 
law. Our investments in the future, investments that would continue to 
generate thousands of American jobs, also directly depend on the 
efforts of CBP to ensure that foreign vessels with foreign crews are 
prohibited from routinely violating the Jones Act in the Gulf of 
Mexico. We are pleased that CBP has worked with us in a constructive 
fashion to improve compliance with the Jones Act, and we look forward 
to even more vigorous enforcement in the years to come.
    Madam Chairman, thank you for inviting me to appear before the 
subcommittee today. I will be pleased to answer any questions that you 
or any members of the subcommittee may have.

    Senator Landrieu. Thank you. Thank you, Mr. Adams.
    Our whole delegation is working on it with the other gulf 
coast Senators. We will continue to push it. It is extremely 
important.
    But between the pressures on our seafood industry not just 
from natural disasters, but from the failure to be able to 
enforce and collect in this area, and with the permatorium that 
we say is still in effect in the gulf, it is a very tough time 
for many industries. And indirectly, of course, you have got 
the hospitality industry, which is affected by these base 
industries that are not able to perform at their highest 
levels.
    Let me ask quickly just a couple of things. All of you--Mr. 
Baumer, Mr. Hayes, and Mr. Busse--have you all ever used the e-
Allegations process? They have created an online referral 
process for AD, or any of your members or associates? Have you 
all used that process? Are you familiar with it? It is called 
e-Allegations. I think it is an online way for people to enter 
complaints or et cetera.
    Mr. Hayes, are you familiar with it?
    Mr. Hayes. Madam Chair, I am familiar with it. Not 
intimately, but I can tell you that in our industry, there have 
been complaints that have been made that were industry-driven 
because of our knowledge of what is going on. I don't know that 
they were made through the e-filing system. But there have been 
complaints registered with respect to transshipment, 
misclassification, and other issues.
    But I am not so sure that any of it has been directed 
directly to undercollection and noncollection issues. But 
certainly, we will take a look at the e-filing system and 
familiarize ourselves with it to see if it is efficient and if 
it works.
    Senator Landrieu. Anybody else want to comment on that? If 
not, don't feel compelled. Mr. Busse.
    Mr. Busse. Madam Chair, our steel producers, I am not sure 
if other steel producers have used the system. We have not, but 
our clients have. The pipe and tube making community uses that 
system today.
    Senator Landrieu. Okay. Mr. Baumer, help me understand, 
when the old Byrd rule was in effect that has been ruled not up 
to standard with the World Trade Organization (WTO) guidelines, 
but there was money collected under that rule. How did you all, 
some of the processors use some of that funding? How did you 
use it to sort of reinvest and/or recapitalize, and do you have 
any suggestions about how we could move forward and either 
reshape or redesign that process?
    It seems only fair to me that some of the penalties, the 
injured parties themselves should receive some benefit from the 
violations that occur. But do you want to comment on any of 
that and clarify some of it?
    Mr. Baumer. Yes. I guess on how the Byrd money that was 
distributed to the industry was used would depend on the 
individual circumstances. For us as a company, and a lot of our 
other processors and fishermen, we used it in multiple ways.
    The first way is we upgraded our plants, put new machinery 
in, new floors, new buildings, new refrigeration. A second way 
that we did it was we paid more at the dockside for shrimp that 
we would otherwise pay while we are competing with imports. So 
we used that as our profit margin, so to speak, to pay higher 
prices than we can actually sell the shrimp for on the open 
market.
    And three, what it allowed us to do, it gave us more 
capital to inventory product year-round. In our industry, 
capitalization is very important because, as a domestic 
industry, we only fish for certain months out of the year. But 
to compete with imports, we can't write long-term contracts 
because we are not sure what is coming out of the water.
    So, to the best of our ability, we buy product, inventory 
millions throughout the months that we are not fishing to keep 
our customers year-round. So inventory, upgrades on plants, and 
higher dock prices I would say, give or take, are the three 
areas that were most beneficial.
    On the future, to address the question on the future, I 
personally, and a lot of people in our industry would love to 
see some of the monies that are collected be put back into our 
industry. It was WTO-inconsistent, but I would like to see a 
very easy way, I think, to do it would be to get that money 
back into our fishermen's hands, maybe through fuel subsidies.
    So we could buy shrimp at potentially a lower price or a 
fair price, but it would eliminate some of their risk when they 
are fishing. Still cover their expenses. And we would 
potentially be able to get shrimp at a lower cost to compete 
with imports that are continuing to come in cheaper and cheaper 
at times.
    So fuel subsidies would be a great way, as well as upgrades 
on rigs to put newer fishing methods, more sustainable fishing. 
A lot of the retailers in this country, as you know, are moving 
to the Marine Stewardship Council or to other sustainability 
measures. And the more our fishermen have money to invest in 
their fleets to upgrade to produce more sustainable, so to 
speak, a more sustainable catch, would also be an upgrade.
    Senator Landrieu. Thank you.
    My final question, and I will turn it over to Senator 
Coats. Mr. Hayes, you have worked with this industry, 
particularly aquaculture, shrimp, and crawfish. But as a 
professor, you are familiar. What would be the two or three 
things that you would like to suggest to our subcommittee that 
we can do, either through the appropriations process or focused 
on either resources or directing resources or enforcing what 
the laws allow us to do today?
    Mr. Hayes. Thank you, Madam Chair.
    My suggestion would be, No. 1, focus on the bonding issue. 
That is a very easy fix, and it is something that can be done, 
arguably, by CBP on its own, with some direction from this 
subcommittee and from the Congress.
    The enhanced bonding issue, if it is applied on a neutral 
basis, based upon an objective risk assessment, then I believe 
it would be WTO-consistent and also in compliance with our 
domestic laws. That is a very easy thing that we can do to 
capture those duties that are being uncollected.
    Also the new shipper issue, having them post cash deposits 
rather than the bond is an easy fix that I think the Congress 
would have to create. But that is also something that could be 
done.
    And then, also the notion of some type of separate remedy 
in these types of situations that, in addition to the civil and 
the criminal fraud actions where they have very high thresholds 
to prosecute these cases, if we have sort of a revenue remedy 
where there is adverse inferences against the foreign importers 
who are trying to game the system, then if there is this 
revenue remedy available and the industry is engaged, then it 
is a very pragmatic way to address the issue.
    So I think the bonding issues are very important, and they 
are very obtainable. And they are quite easy to address. And 
then also this notion of a separate type of remedy that would 
allow individuals or groups to bring complaints to the 
appropriate administrating authority to investigate these 
issues and have information freely shared between Customs and 
DOC under an administrative protective order, which has been 
very successful in the AD environment.
    So those are two things, Madam Chair, that I would suggest. 
And just real briefly, if I could? Mr. Yager, this morning, was 
discussing the retrospective system that we have. I just wanted 
to point out that that system is not only the most fair and 
transparent system in the world. It allows you to collect more 
revenue because we determine what the actual dumping rate is.
    There is a preliminary rate. And then after the review, 
that rate is often much higher. So the retrospective system 
allows you to collect more revenue, assuming that Customs and 
DOC are doing their job appropriately.
    So I just wanted to mention that we are strong supporters 
of the retrospective system that we have, as long as Customs 
and DOC have the tools necessary to collect the duties.
    Senator Landrieu. Mr. Baumer. And then I will turn to the 
Senator.
    Mr. Baumer. I would like to add one more thing that I was 
thinking about that I wanted to mention to you. I mentioned 
fuel subsidies on some of that money. Another avenue that would 
be excellent for the industry is to fund, at least early on 
until they become self-sustainable, a marketing program similar 
to Wild American Shrimp.
    I know the American Shrimp Processors Association has 
numerous processors that process and distribute most of the 
shrimp in the United States, and we are working together now to 
create a united marketing program because 90 percent of the 
people that eat shrimp in this country, when they are eating 
them, think they are eating domestic. And if those people were 
aware of what they were eating, 90 percent of them, because of 
the flavor profile, as you mentioned earlier, would choose to 
eat domestic shrimp.
    But with such a small niche industry, 5, 10 percent at 
times, it is going to take a pretty cohesive marketing and 
broad marketing program to inform people of what they are 
eating to help out our industry and get it out of that 
commodity market.
    Senator Landrieu. Thank you very much.
    Senator Coats.
    Senator Coats. Thank you, Madam Chair.
    Thanks, all four of you, for your testimony here this 
morning.
    And Madam Chair, thank you for holding the hearing. It has 
been informative, and we talked just a couple of whispers here 
in between in terms of some action that we think we can take 
regarding some of the trade agreements that are coming before 
the Senate this year. So this has been very, very helpful.
    Mr. Busse, thank you also for your testimony and for being 
here. You made three recommendations for us. And the first was 
a statutory timeline issue, which we will take a look at. The 
second was the resources and personnel necessary to have the 
various departments become the most efficient and effective 
that they can be. And the third was the production 
verification.
    I think those are all legitimate recommendations. I know 
that the chairman and I will be discussing how we look at that 
and how we potentially can address those three issues.
    I just have one question for you, Keith, relative to the 
resources and personnel question. As you heard, I asked that 
question to the first panel, and the answer was essentially we 
pretty much have what we need.
    Now, as I said, that is welcome news to us that are in a 
position where people are going to be asked to do more with 
less. And we don't have the funds available out there to do 
many add-ons, if any. But I would be interested in your 
response to them when they said, ``We have got what we need. 
Maybe there is a few more efficient ways of doing our work, but 
we have the resources, and we have the personnel.''
    But that is really contrary to what you are saying, at 
least I think what you are saying. Do you want to comment on 
that?
    Mr. Busse. I think it has been clearly established there is 
cheating and fraud going on, and I think it really is low-
hanging fruit. I think the return on investment is monumental 
there.
    It is appropriate, I think, that we are sitting here in the 
Dirksen building. I think it was Senator Everett M. Dirksen 
that said, ``A million here and a million there, and pretty 
soon, we are talking about real money.''
    I guess in today's environment, where we have enormous debt 
and we have revenue streams that don't match that debt, running 
enormous deficits, I would say this is one of the easier areas 
to pick up a billion or two. Because I think the phrase today 
would be, ``A billion here and a billion there, and pretty 
soon, we are talking about real money.''
    So it is tough enough to bring a dumping case. A lot of 
work goes into that, and they are hard to win. But when you win 
them, I think enforcement is paramount. And it is obvious we 
are not getting the job done.
    We can say we have adequate resources, but there is still 
cheating going on out there and evasion of a duty exists today. 
So I would say my challenge to them would be why aren't we 
getting the job done if you have the adequate resources?
    Senator Coats. Madam Chair, thank you.
    Senator Landrieu. Yes.
    Senator Coats. That is all the questions that I have. 
Again, thanks to the panel for your contributions here, and we 
look forward to continuing to work with you and administration 
officials to, as you say, go after that low-hanging fruit and 
have a better system that not only brings in more revenue, but 
also protects U.S. industries and U.S. jobs.
    Senator Landrieu. Thank you.
    I just have three brief questions. And while Senator Coats 
is here, just bear with me for a minute.
    It is very hard, I think, sometimes for the people in our 
country to understand just the visual difference between the 
west coast, the east coast, and the gulf coast. Just very 
briefly, the gulf coast--because we do oil and gas drilling--we 
literally have cities operating offshore. There are no cities 
operating off the shores of California or New Jersey. We 
literally have cities, what I would describe as skyscrapers 
that are taller than the skyscrapers in any of our cities out 
in the gulf.
    So we have an inhabited gulf. It is like living on the 
water. Not just boats coming back and forth, but people 
inhabiting platforms, which is why I think, Mr. Adams, you got 
to your program of these offshore private companies helping the 
Coast Guard helping Customs. Customs doesn't have a fleet of 
boats.
    The Coast Guard is very overworked and stretched right now. 
So one of my questions is when you all started with OMSA 
support, this effort OMSA, you created the Jones Act Compliance 
Program to be the eyes and the ears in the gulf. So you can 
identify foreign vessels that are unidentified. Your crew 
members would be out there seeing them.
    It is an excellent example of public-private partnerships, 
which the two of us are very supportive of, trying to limit the 
cost to the Government by leveraging the private assets. But 
you said there were six or you said in your testimony there 
were six documented violations OMSA members, OMSA members 
reported, but there have been no follow-up.
    Do you know why these particular violations that you have 
reported had not been followed up? I am very curious as to why 
they haven't.
    Mr. Adams. I think there has been work conducted on the 
cases. They just haven't been--and should be. I am sorry. The 
cases are pending the issuance of a penalty.
    Senator Landrieu. But no fines have been assessed. So you 
all reported them. You did what you were supposed to do. There 
are investigations underway on those six ships that seem to be 
out of compliance, but no fines have been assessed, to your 
knowledge?
    Mr. Adams. That is correct. And I can't explain why. I 
would just encourage the assessment of a fine. It would provide 
the market clarity we need.
    Senator Landrieu. Okay. And finally, Mr. Baumer, we didn't 
talk at all, and I want to get this into the record, about the 
health risk of some of the seafood that is coming in from 
potentially China, other parts, Asia, et cetera. Are you 
hearing complaints or have any evidence to suggest or testimony 
to give about the health and safety risk associated with some 
of these products coming in that are part of the illegal 
dumping that is going on?
    Mr. Baumer. Most of the testimony that I would provide 
would be in the GAO report that, in fact, I just reviewed this 
on the plane over here. You constantly hear in our industry 
about drug residues and so forth. And to me, it is surprising 
to me to think that we allow right now importers to put drugs 
or antibiotics into seafood that are not approved by the FDA.
    Almost to the point where it is almost an equal protection 
violation under our Constitution that to think if you have 
aquaculture in this country, you cannot use an antibiotic that 
can be used in another country to keep the bacteria off of the 
shrimp.
    And to the extent that and those antibiotics cause long-
term effects, maybe the science isn't quite there yet. But it 
is certainly an issue that I think needs to be explored and 
informed to the public more than it is currently being done.
    Senator Landrieu. Okay. Thank you all very much.
    It has been a wonderful hearing. I see a young gentleman 
behind you. Is that part of the seventh generation?
    Mr. Baumer. This is the fifth generation.
    Senator Landrieu. Fifth generation.
    Mr. Baumer. Fifth generation. This is my son, Vincent.
    Senator Landrieu. Vincent, welcome to our hearing today. We 
thank you for being here.
    Mr. Baumer. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
                   Questions Submitted to Loren Yager
            Questions Submitted by Senator Mary L. Landrieu
                   under-collection of tariff revenue
    Question. Based on information contained in the annual anti-dumping 
and countervailing duty (AD/CVD) enforcement report required by the 
Homeland Security appropriations law, a total of more than $1.5 billion 
in duties have not been collected between 2001 and 2010. Of this 
amount, more than $1 billion are uncollected AD/CVDs--of which more 
than $660 million consists of duties owed on seafood--and 94 percent of 
the under-collected seafood duties are from China. We are facing huge 
budget deficits in this country. For that reason alone, we should be 
more aggressive in collecting duties we are rightly owed. Why are we 
not doing more to collect all duties?
    Answer. We have undertaken a number of efforts over the years to 
help the Congress better understand issues related to uncollected AD/
CVDs, and our work has identified a number of opportunities for 
improving duty collection. For example, our written testimony statement 
\1\ noted that duty collection could be improved by revising the 
retrospective nature of the U.S. system and by requiring companies 
applying for new shipper status to have a minimum amount or value of 
imports before receiving an individual AD/CVD rate. Similarly, our 
March 2008 \2\ report on uncollected AD/CVDs included several 
recommendations to help ensure the full collection of AD/CVDs. 
Specifically, we recommended that:
---------------------------------------------------------------------------
    \1\ GAO, Antidumping and Countervailing Duties: Options for 
Improving Collection, GAO-11-693T (Washington, DC: May 25, 2011).
    \2\ GAO, Antidumping and Countervailing Duties: Congress and 
Agencies Should Take Additional Steps To Reduce Substantial Shortfalls 
in Duty Collection, GAO-08-391 (Washington, DC: Mar. 26, 2008).
---------------------------------------------------------------------------
  --the Department of Homeland Security (DHS) determine whether bonding 
        requirements can be adjusted to further protect revenue;
  --the Department of Commerce (DOC) work with DHS to identify 
        opportunities to improve the clarity of liquidation 
        instructions; and
  --DOC develop a strategic human capital plan to ensure that it has 
        sufficient human capital to issue timely and clear liquidation 
        instructions.
    With regard to the first of the recommendations above, U.S. Customs 
and Border Protection (CBP) has stated that it remains committed to 
utilizing its bonding authority to address revenue risk. However, the 
World Trade Organization's (WTO) Appellate Body ruled in July 2008 that 
CBP's enhanced bonding requirement, which was applied to the AD orders 
on shrimp as a test case, was inconsistent with U.S. obligations under 
international agreements. CBP subsequently decided to terminate the 
enhanced bonding requirement. Detailed information on actions the 
agencies have taken in response to the second recommendation is 
provided in our response to the question on ``Effective 
Communications'', and we continue to track the agencies' progress in 
responding to the third recommendation. In addition, given 
congressional concerns that evasion of AD/CVDs results in lost revenues 
and weakens protections for U.S. industry and workers, we are currently 
conducting a review of U.S. efforts to detect and deter evasion of AD/
CVDs at the request of Senators Ron Wyden and Olympia Snowe.
           reasons in defense of a retrospective trade system
    Question. Both the Government Accountability Office (GAO) and DOC 
state that the retrospective trade law--which is current U.S. trade 
law--is ``particularly harmful for small businesses such as shrimp and 
seafood importers''.
    What are the reasons given in defense of this trade system that 
apparently deliberately harms a segment of U.S. employers?
    Answer. We reported in March 2008 \3\ that one relative advantage 
of a retrospective AD/CVD system is the accuracy of the amount of AD/
CVDs assessed. However, we also noted that, in practice, a substantial 
amount of retrospective AD/CVD bills are not collected. This suggests 
that assessing a more accurate duty rate does not necessarily result in 
receiving more accurate duty amounts from importers. Moreover, the long 
lag time involved in assessing a final, more accurate duty rate--3.3 
years, on average, as of our March 2008 \4\ report--creates uncertainty 
over duty liability that can hinder the ability of small U.S. importers 
to make informed business decisions, plan investments, and create jobs.
---------------------------------------------------------------------------
    \3\ GAO-08-391.
    \4\ GAO-08-391.
---------------------------------------------------------------------------
    Is it possible to modify U.S. trade laws so that small businesses 
like these are not harmed while maintaining the system which appears to 
benefit other industries?
    Answer. Our written testimony statement \5\ emphasizes that any 
effort to improve the U.S. AD/CVD system should consider the additional 
costs placed on legitimate importers--including legitimate small 
businesses--while attempting to address the issue of illegitimate 
importers. We believe that one way to pursue the goal of minimizing the 
additional costs on legitimate importers is to include this goal as an 
explicit criterion for consideration in any evaluation of changes to 
the current retrospective AD/CVD system or in the design of a 
prospective system.
---------------------------------------------------------------------------
    \5\ GAO-11-693T.
---------------------------------------------------------------------------
                            shrimp test case
    Question. Your testimony discusses the 2005 decision by CBP to test 
shrimp imports from six countries. This requirement was terminated in 
2009. What were the lessons learned by this test case? What were the 
benefits--and also the costs--of this requirement on companies?
    Answer. We reported in October 2006 \6\ on the effects of CBP's 
revised bonding policy and its application to the ``test case'' of 
shrimp imports. While we noted that the effects of the revised policy 
could not be readily isolated from the effects of other changes 
occurring during the same time period, we were able to identify the 
following lessons learned:
---------------------------------------------------------------------------
    \6\ GAO, International Trade: Customs' Revised Bonding Policy 
Reduces Risk of Uncollected Duties, but Concerns about Uneven 
Implementation and Effects Remain, GAO-07-50 (Washington, DC: Oct. 18, 
2006).
---------------------------------------------------------------------------
  --CBP estimates indicated that more revenue was 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.
  --In addition to the AD duties imposed, the costs associated with 
        higher bond amounts were substantial, according to shrimp 
        importers. Under the revised bonding policy, importers paid 
        higher premiums and typically also had to post the 100 percent 
        collateral required by surety providers before the sureties 
        would 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 was particularly onerous because it restricted the 
        funds available to operate the business, and that this 
        constraint resulted in lost or forgone business opportunities. 
        In particular, 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.
    Moreover, given the WTO's July 2008 ruling that CBP's revised 
bonding policy was inconsistent with U.S. obligations under 
international agreements, we believe an additional lesson learned is 
that consideration of any modification to the U.S. AD/CVD system should 
include analysis of whether the change would be consistent with 
international trade agreements, including WTO rules.
    Question. DOC allows domestic parties to access confidential 
information learned in your proceedings under a protective order. Do 
you feel these protective orders function well? What if these parties 
could also use that information with CBP, and access CBP information to 
use with DOC? Would this be helpful?
    Answer. We have not conducted work on this issue and are not in a 
position to answer this question.
    Question. I understand that DOC is proposing to require cash 
deposits, instead of just bonds, between preliminary and final 
determinations in original investigations. This appears to be a 
positive decision. Do you see any reason we shouldn't make a similar 
change by eliminating the bonding privilege for new shipper reviews? 
What else can you do administratively to minimize abuse of the new 
shipper review process?
    Answer. According to the Department of the Treasury (Treasury), the 
new shipper bonding privilege poses a minimal risk to collection of AD/
CVDs. Specifically, Treasury reported to the Congress in December 2008 
that the added risk associated with a bond, as compared to a cash 
deposit, is equal to the probability of failing to collect on an 
obligation secured by a bond, which is low. Consequently, Treasury 
stated that it did not believe suspension of the new shipper bonding 
privilege would have any significant impact on the collection of AD/
CVDs. Treasury added that the significant risk associated with new 
shippers comes from the retrospective component of the U.S. AD/CVD 
system, without which there would be minimal risk of uncollected AD/
CVDs.
    As noted in our written testimony statement,\7\ one way to improve 
collection of AD/CVDs would be to eliminate the retrospective component 
of the U.S. AD/CVD system and consider the variety of alternative 
prospective systems available. We also noted that the new shipper 
review process could be enhanced without altering the retrospective 
nature of the U.S. AD/CVD system, such as by requiring companies that 
are applying for a new shipper review to have a minimum amount or value 
of imports before establishing an individual AD/CVD rate. At present, a 
shipper can be assigned an individual duty rate based on as little as 
one shipment, intentionally set at a high price, resulting in a low or 
0-percent duty rate. This creates additional risk by putting the 
Government in the position of having to collect additional duties in 
the future rather than at the time of importation.
---------------------------------------------------------------------------
    \7\ GAO-11-693 T.
---------------------------------------------------------------------------
             characteristics of a good anti-dumping system
    Question. GAO reported in 2008 on the U.S. AD system and 
recommended that DOC create a study on the possible advantages and 
disadvantages of alternative systems.
    What are some criteria the Congress should keep in mind as it 
considers ways to improve collection of AD duties?
    Answer. Our March 2008 \8\ report identified several criteria for 
DOC, DHS, and Treasury to address in their analysis and reporting on 
the relative advantages and disadvantages of prospective and 
retrospective AD/CVD systems. Specifically, we stated that the three 
agencies should address the extent to which each type of AD/CVD system 
would likely achieve the following goals:
---------------------------------------------------------------------------
    \8\ GAO-08-391.
---------------------------------------------------------------------------
  --remedy injurious dumping or subsidized exports;
  --minimize uncollected duties;
  --reduce incentives and opportunities for importers to evade AD/CVDs;
  --effectively target high-risk importers; and
  --create a minimal administrative burden.
    In addition, we believe that minimizing the additional costs on 
legitimate importers should be another explicit criterion for 
consideration in any evaluation of changes to the current retrospective 
AD/CVD system or in the design of a prospective system. While this list 
is not intended to be exhaustive, we believe that these are important 
criteria for the Congress to keep in mind as it considers ways to 
improve collection of AD/CVDs.
    What progress has DOC made on such a study?
    Answer. DOC, with input from DHS and Treasury, completed a report 
in November 2010 that addressed the criteria we identified in March 
2008 \9\ and listed a variety of advantages and disadvantages of both 
prospective and retrospective AD/CVD systems.
---------------------------------------------------------------------------
    \9\ GAO-08-391.
---------------------------------------------------------------------------
                        effective communications
    Question. In 2008, GAO reported that there were frequent delays in 
DOC's transmission of liquidation instructions to CBP and that about 80 
percent of the time, DOC failed to send liquidation instructions within 
its self-imposed 15-day deadline.
    How have the agencies improved communication since 2008?
    Answer. In our March 2008 \10\ report on uncollected AD/CVDs, we 
identified untimely and unclear liquidation instructions from DOC as an 
impediment to CBP's ability to liquidate entries subject to AD/CVDs. 
For example, we found that, over the 4-month period we reviewed, DOC 
did not send liquidation instructions to CBP headquarters within its 
self-imposed deadline of 15 days approximately 80 percent of the 
time.\11\ After we made DOC officials aware of the untimely liquidation 
instructions, DOC officials announced a plan to track the timeliness of 
liquidation instructions. Further, as noted earlier, we recommended 
that DOC work with DHS to identify opportunities to improve the clarity 
of liquidation instructions. In February 2010, DOC and CBP deployed a 
new component specific to AD/CVD issues as part of CBP's cargo 
management system (the Automated Commercial Environment (ACE)), to 
increase the efficiency of communication between the two agencies. CBP 
personnel at the port can now utilize the system to submit inquiries 
and seek clarification of DOC's liquidation instructions. In addition, 
a messaging system was built into ACE, enabling CBP to track the 
sending and posting of DOC's liquidation instructions. ACE was also 
modified to build in a new case reference file that includes 
information such as Harmonized Tariff Schedule numbers, scope of 
information, start and stop suspension dates, and cash/bond data. This 
case reference file allows for the automatic application of cash 
deposit and liquidation instructions, and according to DOC, streamlines 
the communication process between both agencies.
---------------------------------------------------------------------------
    \10\ GAO-08-391.
    \11\ We have not updated these statistics since 2008.
---------------------------------------------------------------------------
                          bonding requirements
    Question. Right now, even if DOC has preliminarily determined that 
the final dumping rate is likely to be higher than the cash deposit 
rate, we don't immediately change the bonding requirements to reflect 
that. Even where DOC has reached a final determination of increased 
liability, we still don't update our bonding requirements if that 
determination is appealed to the courts.
    Can the bonding requirements for an individual company be updated 
in a more timely fashion? Given that it often takes an importer years 
to be held accountable for their violations, do you think that the 
outcome of an investigation still makes an impact on the market? What 
could be done to expedite these types of investigations?
    Would you support a change that requires bonding requirements to be 
enhanced after a DOC determination that the margins are likely to 
exceed cash deposits, even if the determination is only preliminary or 
being appealed? Isn't it better to err on the side of protecting the 
revenue once we have an indication from DOC that cash deposits may not 
cover an importer's ultimate liability?
    Answer. We have not conducted work on these issues. However, in our 
written testimony statement,\12\ we noted that while the increased up-
front costs for higher bonds can deter malfeasance by illegitimate 
importers, the higher costs may also affect legitimate importers who 
pose little risk of failing to pay retrospective AD/CVDs.
---------------------------------------------------------------------------
    \12\ GAO-11-693T.
---------------------------------------------------------------------------
    Question. In CBP's statement, it discusses how easy it is for an 
importer to find and collude with a producer to avoid paying dumping 
duties. It lists some of these schemes including illegal transshipment, 
undervaluation, failure to manifest, and misclassification. If a 
company--or a country--deliberately sets out to engage in these kinds 
of trade fraud, how can the U.S. Government appropriately tackle this 
issue?
    Answer. As noted earlier, we are currently conducting a review of 
the issue of evasion of AD/CVDs at the request of Senators Ron Wyden 
and Olympia Snowe. We would welcome the opportunity to brief the 
subcommittee on the results of this review once completed.
                         product concentration
    Question. CBP reported that uncollected AD duties are highly 
concentrated among a few products (crawfish, fresh garlic, mushrooms, 
honey, and wooden bedroom furniture). These five products represent 
more than 80 percent of the uncollected duties.
    Why are uncollected AD duties concentrated among these products? 
Why don't you focus your limited resources on these products and create 
task forces as was done for textiles?
    Answer. Four of these products are agriculture/aquaculture 
products. In 2006,\13\ we reported that CBP had identified agriculture/
aquaculture importers as sharing certain characteristics that made them 
a high risk for being unable to pay the full amount of AD/CVDs owed, 
namely:
---------------------------------------------------------------------------
    \13\ GAO-07-50.
---------------------------------------------------------------------------
  --low capitalization and many small firms;
  --a high degree of leveraging and dependence on borrowing;
  --a fluid market with many entrants and exits; and
  --most importers had 5 years or less in the industry.
    However, DHS noted in its comments to our 2008 \14\ report that 
countries, industries, products and importers that currently pose a 
revenue risk may not be the same ones that will pose a revenue risk in 
the future. For this reason, we believe it is important to identify the 
underlying reasons for noncollection.
---------------------------------------------------------------------------
    \14\ GAO-08-391.
---------------------------------------------------------------------------
                         willful circumvention
    Question. As noted in the background section, companies willfully 
circumvent the provisions of the AD/CVD laws by illegally transshipping 
goods through an intermediate destination to mask the true country of 
origin; undervaluing goods to reduce the amount of AD/CVD owed; 
misclassifying or misdescribing merchandise outside the scope of the 
order and, therefore, not subject to AD/CVD; and failing to manifest 
(smuggling) goods. What remedies are there to pursue those who 
willfully circumvent the laws?
    Can the U.S. Government issue--in essence--a ``stop importing'' 
order against the company or the individual? Recognizing it is 
difficult to collect revenues and conduct inspections overseas, what 
can we do to the U.S.-based representatives of these illegal importers?
    Answer. Regarding remedies to pursue those who willfully circumvent 
the laws, we are currently conducting a review of the issue of evasion 
of AD/CVDs at the request of Senators Ron Wyden and Olympia Snowe. As 
mentioned earlier, we would welcome the opportunity to brief the 
subcommittee on the results of this review once completed.
    In May 2011, the Assistant Commissioner of CBP's Office of 
International Trade stated in a Senate hearing that CBP is developing 
internal guidance to require that importers at risk of evasion take out 
one-time bonds that cover at least the full value of the shipment 
(single-transaction bonds). Currently, shippers typically take out a 
``continuous bond'' that covers all import transactions over the course 
of a year and is calculated at 10 percent of the prior year's duties 
(or $50,000, whichever is greater). We have not reviewed CBP's guidance 
or assessed its potential effect on the collection of additional AD/
CVDs. However, any effort to improve the U.S. AD/CVD system should 
consider the additional costs placed on legitimate importers while 
attempting to address the issue of illegitimate importers.
                                 ______
                                 
                   Questions Submitted to Allen Gina
            Questions Submitted by Senator Mary L. Landrieu
                      collecting duties on shrimp
    Question. Customs and Border Protection (CBP) claims it has taken 
steps to specifically improve the collection of anti-dumping (AD) 
duties on shrimp imports and that it continues to explore statutory and 
nonstatutory changes to enhance bonding requirements.
    Please list the specific steps you are taking and when did you 
start taking these steps as they related to shrimp imports?
    Answer. In 2004, CBP applied to anti-dumping/countervailing duty 
(AD/CVD) shrimp imports a revised bond policy which 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). 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. CIT also recently struck down this policy as well. CBP is 
currently developing internal guidance to ensure that single-
transaction bonds (STBs) are required whenever we suspect that a risk 
of revenue loss exists due to evasion for shrimp and other AD/CVD 
imports.
               use of fines collected for investigations
    Question. What legal impediments prevent CBP from being able to use 
a portion of the fines it collects to cover the costs of increased 
investigations?
    Answer. CBP does not have specific statutory authority to 
supplement its appropriations, as with certain user fees, and CBP 
cannot use fines or duties that it collects to cover program costs. By 
law, CBP deposits them directly into the U.S. Treasury.
                              transparency
    Question. We frequently hear from U.S. industry that many of the AD 
charges it brings to CBP seem to enter a ``black hole''--never to be 
responded to by CBP. But in your testimony you claim that you ``meet 
regularly with U.S. industry representatives to discuss AD/CVD 
circumvention schemes''. Why does industry have this impression? How 
can CBP fix the information sharing and transparency process?
    Some U.S. companies have charged that CBP claims it cannot share 
information because of Trade Secrets Act restrictions. Is this true? 
Why? What are the legal--as opposed to internal policy or practice 
guidance--prohibiting CBP from keeping an importer regularly updated on 
status of the charges?
    CBP has created an online complaint process called e-Allegations. 
How many individual complaints have been received on it and how many 
has CBP acted on? What information on the investigation of these 
allegations is transmitted to industry?
    You have stated that you are reviewing the trade secrets statute 
and regulations to find ways to allow CBP to release information to 
petitioners to make the investigations process more transparent. Please 
give me a date when that review will be completed and a date when the 
results of it will be implemented.
    Does CBP need a trade enforcement ombudsman to act as an 
interlocutor with industry?
    Answer. As noted, CBP meets regularly with U.S. industry 
representatives to discuss AD/CVD circumvention schemes. We also 
understand that U.S. industry wants more transparency in CBP's AD/CVD 
circumvention enforcement efforts, especially in response to specific 
allegations of AD/CVD circumvention. In certain circumstances, e.g., 
when developing a criminal investigation or evaluating the sufficiency 
of alleged circumvention activities, CBP is limited in what information 
CBP can make public. As discussed more fully below, CBP is evaluating 
opportunities to share greater information with our trade partners.
    We are examining ways to timely release information to the public 
about our enforcement activities while providing safeguards to 
legitimate trading community against frivolous claims. We are currently 
looking at steps to find ways that will allow us to release information 
to petitioners to make our process more transparent. These include 
earlier publication of enforcement actions. We have also asked the AD/
CVD working group of CBP's private sector Commercial Operations 
Advisory Committee work group to provide feedback on greater 
information sharing with the trade community on AD/CVD enforcement.
    Yes, much of the information relating to AD enforcement is business 
confidential information and the Trade Secrets Act imposes criminal 
liability upon Federal employees who disclose confidential commercial 
information unless there is a statute or regulation authorizing such 
disclosure.
    CBP is prohibited by the Trade Secrets Act from providing business 
confidential information obtained from one party to another party who 
is not part of the import transaction.
    Since e-Allegations' inception in June 2008, CBP has received more 
than 4,000 commercial allegations via www.cbp.gov--370 of these 
allegations are AD/CVD-related, and regardless of the subject, CBP 
reviews and makes an initial assignment of each allegation within 2 to 
3 days of receipt. Each allegation is closed out, but how it is closed 
and how long it takes will vary depending on the specifics of the 
allegation, CBP authorities, the need for U.S. Immigration and Customs 
Enforcement (ICE) investigative capabilities, and the ability of CBP to 
take action if a violation is confirmed. Most allegations are closed 
within 6 months, but others will take longer if they are especially 
complex or involve overseas parties. An allegation can conclude with 
enforcement action, or the allegation is disproved, or others where the 
allegation appears credible, but CBP is unable to prove the violation 
to the standards required by our authorities. In the latter case, the 
allegation may be closed from an analytical perspective, but 
operational monitoring and follow-up action may continue.
    CBP is prohibited by the Trade Secrets Act to release confidential 
commercial information contrary to the commercial provisions of that 
act. There is also information that we cannot make public when there is 
a criminal case related to an allegation under development. Such cases 
usually require time to develop as CBP, in cooperation with ICE, fully 
investigates and prosecutes the parties that are not properly paying 
their AD/CVDs. All of this notwithstanding, we are taking all necessary 
steps to find ways that will allow us to release information to 
petitioners to make our process more transparent.
    CBP has been looking at ways that we are able to share information 
on trade enforcement. Recently we provided internal guidance to our 
ports of entry to publish enforcement results earlier. This new policy 
has been successful in CBP being able to publicize its role in the 
conviction of smugglers of wire hangers that were subject to AD/CVD. We 
have started a review of the process under which we keep information 
protected from inappropriate release. We will continue to look for ways 
that we can be more responsive to the public and to share with them as 
much as possible while ensuring the confidentiality of business-
sensitive materials or information that could be used to build a 
criminal case. We anticipate that this review will be done by the end 
of the fiscal year.
    CBP has established the Office of Trade Relations (OTR) to act as 
the senior advisor to the Commissioner on issues related to private 
sector industry and trade. OTR is responsible for and has a process 
established to ensure that challenges and concerns raised by trade 
stakeholders is addressed in an efficient and timely manner and that 
particular problems or concerns have the visibility of the 
Commissioner. CBP is committed to ensuring that this office and its 
role have the capacity to carry out this important responsibility.
                       louisiana shrimp industry
    Question. The Louisiana shrimp industry contributes about $1 
billion annually to the State economy. Thousands of our citizens are 
employed in this industry that is both culturally and economically 
important to our State and the entire gulf region. This industry fought 
to win AD orders on shrimp from six countries, and yet importers have 
failed to pay more than $75 million in AD duties they owe to the U.S. 
Government under these orders. Importers of crawfish have gotten away 
with not paying another $560 million in duties they owe. In fact, 
seafood alone accounts for a full 43 percent of the more than $1.5 
billion in duties we have not been able to collect since 2001. The 
system is broken and it needs to be fixed.
    There are several factors at work. First, imports from China seem 
to be driving the problem--China alone accounts for more than 90 
percent of the uncollected duties on seafood, for example. We also have 
a lot of fly-by-night operators who disappear once duties become due. 
This is especially true in fragmented industries like agriculture and 
aquaculture. We can't change the fact that more and more of our imports 
are from China and that some players in fragmented industries try to 
avoid their duty obligations. While it is beyond this subcommittee's 
jurisdiction, perhaps what we should do is update our system so it 
adapts to these market realities.
    I know CBP is aware of the problem, particularly in the seafood 
industry, and that you tried to address it without success.
    Has CBP considered imposing enhanced bonding across the board? 
Alternatively, couldn't you require enhanced bonding whenever there a 
risk of underpayment arises based on some neutral criteria, such as 
history of under collection under a particular order? Can you do this 
under your existing statutory authority, or would you need help from 
the Congress to do this?
    Answer. CBP has considered all options available for enhanced 
bonding that would be consistent with the WTO Appellate Body's finding 
that an enhanced bonding requirement was WTO-inconsistent, and CIT's 
ruling that an enhanced bonding policy covering certain importations of 
shrimp was arbitrary, capricious, and otherwise not in accordance with 
law. It has been determined that enhanced bonding cannot be imposed 
across the board, so CBP will focus on using STBs where there is a 
reasonable belief that a particular shipment poses a risk to the 
revenue.
    So long as the United States employs a retrospective AD/CVD scheme, 
CBP continues to consider whether it is possible to require enhanced 
bonding in light of the recent decision of the WTO Appellate Body, and 
CIT's decision in National Fisheries Institute (NFI) v. United States. 
In NFI, CIT ordered an enhanced bonding policy covering certain 
importations of shrimp subject to AD duty orders to be set aside as 
arbitrary, capricious, and otherwise not in accordance with law. 637 F. 
Supp. 2d 1270 (Ct. Int'l Trade 2009). Setting aside concerns about 
CBP's legal authority to require enhanced bonds, CBP may be able to 
identify one or more neutral criteria as the basis for enhanced 
bonding, but such criteria must be selected and applied with care to 
avoid being set aside as arbitrary and capricious.
    Section 623 of the Tariff Act of 1930 provides CBP with broad 
authority to require bonds to protect the revenue in import 
transactions. Meanwhile, the Department of Commerce (DOC) has been 
given broad authority to investigate and establish AD duty rates and 
require security for such duties at entry. It has been and continues to 
be a subject of judicial inquiry as to how these separate authorities 
interrelate. CBP continues to consider adopting an enhanced bonding 
policy that would protect the revenue, as well as ensure compliance 
with the laws, and that would withstand judicial and international 
scrutiny.
    Question. In your statement, you say that CBP is taking additional 
steps such as working with DOC on releasing information to help verify 
the legitimacy of goods suspected of transshipment and to tighten the 
``new shipper'' requirements, as clarifying the responsibility of 
customs brokers. When are these planned to be completed and executed?
    Answer. Our work with DOC on transshipment issues is ongoing, and 
we will continue to work with DOC on any goods suspected of 
transshipment. We are discussing new shipper-related issues with DOC.
    In regards to clarifying the responsibilities of customs brokers, 
CBP meets regularly with representatives of the National Customs Broker 
and Forwarders Association of America to redefine the role of the 
broker in the 21st century. This project will identify regulatory 
revisions that may be necessary to reflect current business practices 
and determine the appropriate response to existing gaps or needs.
    You state that you have asked your staff to develop internal 
guidance to ensure that STBs are required whenever CBP suspects that a 
risk of revenue loss exists.
    Question. You state that you have asked your staff to develop 
internal guidance to ensure that STBs are required whenever CBP 
suspects that a risk of revenue loss exists. Please describe this 
process in greater detail. What are the benefits to industry of this 
process? Do you have estimates of additional revenue that could be 
collected, or potential losses of revenue prevented, by using these 
types of bonds versus a continuous bond?
    Answer. CBP staff is reviewing all of the potential scenarios to 
ensure that STBs are required whenever CBP suspects that a risk of 
revenue loss exists for AD/CVD imports. These scenarios will be 
incorporated into the final internal guidance on this topic.
    This process will protect the revenue due to the United States on 
AD/CVD imports, including AD/CVDs. AD/CVDs are intended to offset the 
dumping and subsidization of foreign imports, and create a level 
playing field for U.S. manufacturers.
    Under the retrospective AD/CVD system, it is not possible to 
predict the final AD/CVD assessment rate on entries covered by an STB 
or any other type of bond. Therefore, it is not possible to estimate 
any additional revenue that could be collected, or potential losses of 
revenue prevented, by using STBs.
    Question. Regarding clearing account balances--does CBP actually 
hold these dollars in a separate account pending final orders?
    Answer. Yes, pending liquidation.
    Question. In a May 5 hearing, CBP's Commissioner of International 
Trade stated that CBP is developing internal guidance to require that 
shippers at risk of evasion take out one-time bonds (STBs) that cover 
at least the full value of the shipment.
    How will CBP identify ``shippers at risk?'' How will this reduce 
the risk of uncollected duties?
    Answer. CBP will identify shippers and importers at risk of evasion 
by analyzing trends in import information, previous instances of 
noncompliance, and allegations from outside sources, including U.S. 
industry.
    CBP currently has authority to protect the revenue through the 
requirement of STBs that is set at the full value of a shipment. CBP is 
providing further guidance on the use of these bonds to our ports of 
entry to ensure their use when potential evasion has been identified.
    Question. In one of the questions for the record from the 
subcommittee's March 2, 2011, hearing regarding improved AD revenue 
collections, you only responded to the question about what laws could 
be changed or amended to enhance CBP's AD investigations. Please 
respond to the following questions:
    Can CBP take administrative actions to improve AD collections?
    Can CBP take administrative actions to improve AD collections in 
the absence of legislation?
    In the absence of changes in legislative authorities to existing 
laws and practices, can CBP do more to collect and distribute AD 
receipts to injured U.S. businesses if it was provided with additional 
resources?
    If so, what resources would be required and what more could be 
achieved?
    Answer. CBP continues to explore the existing tools it possesses, 
i.e., live entry, sanction, bond sufficiency, and targeting, to remain 
aggressive in its revenue collection.
    Additional resources cannot fix the most prevalent issue with 
collecting AD duties which is the retrospective collection system and 
passage of time between entry and liquidation.
    Question. I'm pleased that you acknowledge that ``CBP has a 
statutory responsibility to collect all revenue due to the U.S. 
Government that arises from the importation of goods''. I am very 
concerned, however, that despite this statutory responsibility, CBP has 
made virtually no effort to collect nearly $1 billion in AD duties that 
are due to the United States in connection with the AD duty orders on 
honey, fresh garlic, preserved mushrooms, crawfish, and wooden bedroom 
furniture from China.
    What is your agency's strategy for promptly recovering these AD 
duties?
    Answer. As part of the debt collection process, CBP sends out 
dunning notices to the principal. CBP issues formal demand on the 
respective surety for payment of the delinquent amount and pursues 
litigation against delinquent debtors and sureties. CBP also conducts 
research to determine if the company is still actively operating.
                              new shipper
    Question. Another problem we have is with new shipper reviews, 
where companies enjoy the privilege of only having to post a bond, and 
not cash deposits, while a new shipper review is pending. How much of 
the problem of under collection do you think is due to new shippers 
versus other evasion schemes?
    This new shipper bonding privilege is currently provided for by 
statute. Would you support a statutory change that would require new 
shippers to post cash deposits--like is done for everyone else?
    Answer. According to the March 2008 report on AD/CVDs prepared by 
the Government Accountability Office (GAO) importers that purchased 
goods from new shippers are responsible for approximately 40 percent of 
uncollected AD/CVDs.
    In December 2006, section 1632 of the Pension Protection Act 
(Public Law 109-280) was implemented, suspending the option for new 
shippers to bond for estimated AD/CVD from April 1, 2006 through June 
30, 2009. The importers were required to submit a cash deposit to cover 
the total estimated AD/CVD for merchandise exported by a new shipper 
during this ``test'' period. This cash deposit provision of Public Law 
109-280 excluded new shippers from Canada and Mexico. On June 20, 2009, 
this test period ended and the provision lapsed. As noted in CBP's 
fiscal year 2010 Report to Congress on Antidumping and Countervailing 
Duty Enforcement: Fiscal Year 2009, the Department of the Treasury 
decided not to seek extension of the cash deposit for new shipper 
provision because there was no discernible benefit to the collection of 
cash over duties secured by a bond at the time of final assessment of 
AD/CVD.
    Question. As you are well aware, foreign producers and importers 
have resorted to a wide variety of tactics to evade AD/CVDs, and the 
nonpayment of duties we know about is only part of the problem. Illegal 
transshipment, undervaluation of product being shipped, failure to 
manifest or to declare an export, misclassification, and setting up 
shell companies all contribute to the acute duty collection shortfall 
that we are discussing today.
    In your estimate, which transgression contributes the most to the 
overall duty collection problem?
    What tools do you need to better address this problem? Is it a 
funding issue or something else?
    Do you need better ways to collect or access information?
    Do you need more tools to give you greater leverage with importers 
and foreign producers?
    What else could be helpful?
    Answer. When CBP issues a bill for AD/CVDs, an importer can easily 
exit out of the market, and not pay any duties due. This applies to 
both foreign and domestic companies. When companies evade AD/CVDs to 
prevent bills from being issued, it is difficult to estimate which 
issue contributes the most to the overall duty collection problem as 
CBP does not have complete data on AD/CVDs not collected for each of 
these various issues.
    Under the retrospective AD/CVD system, CBP faces many challenges in 
AD/CVD administration and collection. CBP devotes significant resources 
to administering AD/CVD entries under the AD/CVD retrospective system. 
By the time CBP issues a bill for the final AD/CVDs due, many importers 
are unwilling or unable to pay these duties, or no longer exist.
    CBP is working with U.S. industry, ICE, DOC, and our international 
partners to develop new sources of information to identify AD/CVD 
circumvention. We are exploring many options that will give us 
additional information and new tools to protect U.S. revenue.
    Data will help identify new targets and schemes, but verification 
of schemes is crucial to the success of AD/CVD enforcement. Without 
proof, CBP cannot take enforcement action and data alone may not always 
provide the proof needed. CBP is working on integrated analysis within 
CBP and other agencies including ICE and DOC.
    CBP is currently exploring many options that will give us 
additional information and new tools. For example, CBP is developing 
internal guidance to ensure that STBs are required whenever we suspect 
that a risk of revenue loss exists.
    CBP needs information to verify AD/CVD circumvention schemes in 
order to take AD/CVD enforcement action. This often can be very 
challenging for CBP; for example, determining a product's country of 
origin through visual inspection or through verification of shipping 
documents can be very difficult, especially if cargo has been 
manipulated prior to import, completely masking the connection back to 
the true source country. Information regarding the movement of goods 
from one foreign location to another foreign location (which is usually 
not available to CBP when AD/CVD circumvention occurs) may assist in 
this process. CBP is currently looking at our entire process in dealing 
with AD/CVD administration and circumvention enforcement. We continue 
to seek ways to better identify circumvention and to verify the origin 
of the merchandise.
    Question. I understand that companies sometimes apply for ``new 
shipper'' status from DOC, secure very favorable AD/CVD margins, and 
then proceed to ship massively at unfair prices.
    Does CBP have information about these companies that might be 
useful to DOC in considering whether to approve a ``new shipper'' 
application?
    Does CBP have authority to make this information available to DOC?
    Answer. CBP may have information about foreign companies that apply 
for ``new shipper'' status, and provides such information when needed.
    CBP has the authority to make this information available to DOC.
    Question. What is being done to improve coordination between CBP 
and DOC concerning notice of final rates, liquidation instructions, 
scope determinations, and other day-to-day work of administering the 
AD/CVD laws?
    In your experience, how long does it usually take to obtain a 
decision from ICE and the Department of Justice (DOJ) on whether there 
will be a prosecution in a typical case? Does CBP have to hold back on 
its own actions while waiting for these decisions?
    Answer. In February 2010, CBP launched the AD/CVD Module of CBP's 
Automated Commercial Environment (ACE), which provides a modern 
communication system for CBP to communicate with DOC on AD/CVD 
enforcement. The ACE AD/CVD Module incorporates a joint AD/CVD case 
management system for CBP and DOC, and communication systems to 
facilitate coordination between CBP and DOC on AD/CVD enforcement and 
administration issues. CBP personnel also hold regular meetings with 
DOC's Customs Liaison Unit and communicate throughout every work day on 
AD/CVD-related matters.
    The timeframe varies widely with respect to how long it takes to 
obtain a decision from ICE and DOJ regarding whether a case will be 
prosecuted. Several factors--including the severity of the violation, 
the evidence that is available, and the complexity of the 
investigation--impact the timeline for receiving a decision. CBP works 
with partners at ICE and with DOJ throughout this process.
    CBP and ICE have civil and criminal enforcement legal authorities 
available to pursue enforcement action against those who violate the 
customs laws, including AD duty evasion. When criminal enforcement is 
pursued, CBP coordinates with ICE during the investigative phase of 
these cases, and coordinates with DOJ when litigation is commenced. CBP 
also has authority to assess civil penalties, as appropriate.
                      difficulty collecting duties
    Question. In responses to questions for the record from the 
subcommittee's March 2, 2011, hearing, CBP responded that one of the 
difficulties encountered in collecting all duties, taxes, and fees once 
it issues a bill for final AD/CVDs, is that at least two sureties 
issuing bonds covering substantial amounts of these duties are in 
receivership, further complicating collections. Why is that? Please 
give us specific examples.
    Answer. Under the retrospective AD/CVD scheme, by the time CBP 
issues a bill for the final AD/CVDs due, many importers are unwilling 
or unable to pay these duties, or no longer exist, which requires CBP 
to resort to available bond coverage to collect from the appropriate 
sureties. Much like any other business, sureties are vulnerable to 
insolvency, which may force the surety to enter receivership. Two 
sureties--Highlands Insurance Company and Frontier Insurance Company--
have entered receivership proceedings under State insurance law. In 
these proceedings, the Federal Priority Statute, 31 U.S.C. 3713, often 
does not apply as a result of the pre-emption exemption in the 
McCarran-Ferguson Act. The Government's bond claims may then receive 
either less priority than policyholders, or equal priority. Thus, 
collection is complicated not only by the absence of the importer and 
the insolvency of the surety, but also by the fact that the 
Government's bond claims may be subject to a State priority scheme that 
yields the Government a lesser payout on its claims than what might be 
available under the Federal Priority Statute. Moreover, these 
receivership proceedings take years to resolve, during which time the 
Government's claims are stayed in Federal court until the State 
insurance insolvency proceedings are resolved, and the Government often 
has no legal means to accelerate the process to receive payment on its 
claims.
                           verification teams
    Question. CBP uses textile production verification teams to help 
address the problem of duty evasion for textile transshipments.
    What, if any, additional authority would CBP require to send 
verification teams to foreign manufacturing sites to inspect and verify 
that those manufacturers are in fact capable of making the goods that 
are theoretically being exported to the United States?
    Are such teams feasible for products such as shrimp, seafood, 
garlic, honey, and others? What legal authorities, if any, do you need 
to create such teams, or can these teams be created administratively?
    Answer. CBP would be able to send verification teams to foreign 
manufacturing sites as long as it has the consent of the governments 
where those sites are located. CBP has customs mutual assistance 
agreements authorities with many foreign customs authorities which 
could provide an avenue for conducting these visits. In many cases, the 
United States may need to negotiate separate treaty language with 
foreign governments to provide the authority to conduct these visits.
    Such teams are feasible for any product to confirm that 
manufacturing is actually taking place at foreign sites so long as CBP 
has access to the foreign manufacturing facility.
    These teams can be created administratively based on the ability to 
gain consent from foreign countries.
                         statute of limitations
    Question. I am concerned that CBP's failure to take action promptly 
to collect certain duties hinders the United States' ability to collect 
any AD duties under the bonds associated with those shipments, due to 
the applicable statute of limitations.
    Given your recognition of the importance of vigorous enforcement of 
the U.S. AD laws to protect the vitality of U.S. industries, is CBP 
committed to taking action quickly to collect these duties and ensure 
that the U.S. industries involved receive the relief they are due under 
the AD orders?
    In instances where the U.S. importers default on the AD duties that 
are due, what specific actions has CBP taken to ensure that the bonding 
companies responsible for securing those liabilities are meeting their 
obligations?
    Answer. Yes, CBP is committed to taking quick action. CBP makes a 
formal demand on surety when the principal fails to pay. CBP provides 
copies of the documents obligating the associated bond. CBP uses a 
dunning letter and follow-up phone calls to also remind the surety of 
their obligation. If they still fail to pay, CBP pursues legal action 
against the surety.
    Question. It can be difficult to identify country of origin or 
exporter/manufacturer for certain products, such as agriculture/
aquaculture products like shrimp or honey.
    How does CBP test these products at entry to know which duties to 
apply to them?
    Answer. CBP's laboratories use a variety of scientific techniques 
to identify the country of origin for certain products, to ensure that 
the correct duties are applied to these products. For certain products, 
such as steel products, CBP cannot identify the country of origin using 
current scientific techniques.
    There are a large number of products that are covered under AD 
duties. Different products have different tests to determine 
compliance. For example for AD duties involving seafood CBP's Office of 
Information & Technology Laboratories and Scientific Services Division 
(CBP/OIT/LSS) usually tests for country of origin using either DNA or 
protein electrophoresis. For steel AD duties CBP/OIT/LSS determines the 
composition of the steel using either exray diffraction or xray 
fluorescence. This process determines whether the steel product 
violates U.S. requirements. The type of test used to measure compliance 
is dependant upon the product.
                   sharing information with agencies
    Question. Apparently, both CBP and DOC have been concerned about 
the treatment of confidential business information, trade secrets, and 
materials under protective orders for which they are responsible.
    Has CBP prepared any assessments of its authority to share 
information with partner agencies? If so, what are the results?
    Would CBP find it useful to have greater access to DOC information 
obtained during its investigations and verifications?
    Answer. CBP is in the process of preparing its assessment of its 
authority to share information with partner agencies.
    CBP has access to DOC information obtained during its proceedings 
under 19 U.S.C. 1677f(b)(1)(A)(ii). This section provides that DOC may 
disclose proprietary information ``to an officer of the employee of the 
U.S. Customs Service who is directly involved in conducting an 
investigation regarding fraud under this title''. CBP has concerns that 
this could be interpreted to limit disclosure of information only to 
officers or employees of CBP (the successor agency to the U.S. Customs 
Service) conducting criminal investigations. CBP does not normally 
conduct criminal investigations, so this interpretation could limit 
CBP's access to DOC proprietary information.
                          deemed liquidations
    Question. Untimely action by DOC and CBP can impede CBP's ability 
to process the appropriate amount of AD/CVDs within the required 6-
month period. When entries are not liquidated within the specified 
timeframe, CBP is unable to collect any supplemental duties that might 
have been owed because of an increase in the AD/CVD rate.
    What is the amount of lost revenue due to deemed liquidations?
    What steps are CBP and DOC taking to reduce the amount of 
uncollected duties attributable to deemed liquidation?
    Answer. In fiscal year 2010, CBP processed 16,105 deemed 
liquidations of AD/CVD entries out of a total of 141,896 liquidated AD/
CVD entries. We note that CBP has the legal authority under 19 U.S.C. 
1501 to reliquidate deemed liquidated entries at the appropriate final 
AD/CVD rate, and therefore mitigate the effect of the deemed 
liquidation.
    From fiscal year 2006 through fiscal year 2010, CBP wrote-off more 
than $113 million in uncollectible debt. Of the more than $113 million, 
$28.9 million was lost due to deemed liquidations or untimely 
liquidations.
    In February 2010, CBP launched the AD/CVD Module of CBP's Automated 
Commercial Environment (ACE), which provides a modern communication 
system for CBP to communicate with DOC on AD/CVD enforcement. The ACE 
AD/CVD Module incorporates a joint AD/CVD case management, messaging 
and inquiry system for CBP and DOC. These communication systems 
facilitate coordination between CBP and DOC on AD/CVD messaging issues, 
and reduce delays which lead to deemed liquidation. CBP personnel also 
hold regular meetings with DOC's Customs Liaison Unit and communicate 
throughout every work day on AD/CVD-related matters, including deemed 
liquidation issues.
                  faster reaction to industry protests
    Question. The June 2010, AD enforcement report indicated that CBP 
and DOC were working on plans to increase AD collections. One area both 
agencies agreed to review and update was how you can quickly address 
protests by industries so that you can begin duty collection 
activities. The report indicated that DOC had increased staffing levels 
to process these protests.
    Has CBP also refocused its staffing? Have your agencies noticed an 
improvement in this process over the past year?
    Answer. CBP reviewed and enhanced its internal AD/CVD protest 
management process in fiscal year 2010. CBP is also focusing on 
addressing those AD/CVD protests that CBP can rule on under its own 
authority, so collection actions can commence as quickly as possible. 
CBP and DOC are continuing to closely coordinate those protests that 
CBP sends to DOC for recommendation.
    We have noticed a significant improvement in this process over the 
past year. The number of protests with DOC for an AD/CVD recommendation 
has continued to decrease over the past year, from more than 50 
protests to 18.
                       human capital and planning
    Question. In a readout conference, CBP stated that it has no 
information on what is likely to happen the next day--it could get a 
few dozen instructions from DOC that cover a limited number of ports 
and products, or it could get an enormous set of instructions that 
would require enormous effort to get the liquidation instructions 
completed.
    Can you explain the challenges associated with this type of system 
and suggest the kind of information that would help make this process 
work better?
    Answer. Each AD/CVD instruction could potentially require CBP to 
manually calculate the amount of AD/CVDs due for thousands of import 
records at a single or numerous ports of entry within the statutory 6-
month time limit to prevent deemed liquidation. CBP sometimes has much 
less than this 6 months time limit to process these records because it 
does not receive the instructions until after the 6-month clock was 
initiated. The more information that CBP has about potential AD/CVD 
instructions at the earliest point of time possible could help CBP plan 
for this substantial workload.
                          bonding requirements
    Question. Right now, even if DOC has preliminarily determined that 
the final dumping rate is likely to be higher than the cash deposit 
rate, we don't immediately change the bonding requirements to reflect 
that. Even where DOC has reached a final determination of increased 
liability, we still don't update our bonding requirements if that 
determination is appealed to the courts.
    Can the bonding requirements for an individual company be updated 
in a more timely fashion? Given that it often takes an importer years 
to be held accountable for their violations, do you think that the 
outcome of an investigation still makes an impact on the market? What 
could be done to expedite these types of investigations?
    Would you support a change that requires bonding requirements to be 
enhanced after a DOC determination that the margins are likely to 
exceed cash deposits, even if the determination is only preliminary or 
being appealed? Isn't it better to err on the side of protecting the 
revenue once we have an indication from DOC that cash deposits may not 
cover an importer's ultimate liability?
    Answer. The ability to bond is finalized prior to CBP releasing any 
merchandise. Policies may/could be implemented to require that bonds be 
adjusted after the investigations are completed. However, if a surety 
chooses to adjust the bond, they would more than likely require 
collateral from the importer in the amount of the bond adjustment to 
protect their financial interests.
    CBP attempted to accomplish this with the Enhanced Bonding 
Requirement bonding formula. Unfortunately, WTO and CIT overturned this 
formula.
                   complaints of jones act violations
    Question. I am aware that CBP has specific complaints of Jones Act 
violations in the offshore energy sector--unrelated to any vessel 
equipment issue.
    What steps is CBP taking to actively resolve these complaints?
    Answer. When an alleged Jones Act violation is discovered or 
reported, CBP ports of entry attempt to resolve matters through an 
administrative process. CBP reviews the evidence presented, performs a 
physical boarding of the vessel (when possible), conducts interviews 
and when available, accesses automatic identification system data to 
track the movement of suspect vessels. When a determination is made 
that a violation occurred, the CBP local port of entry begins 
administrative penalty proceedings. In those cases where substantial 
evidence does not support punitive action, the CBP port of entry 
retains the information for future consideration and no penalty is 
issued. Input throughout this process is provided by CBP HQ OFO/CCS, 
OFO/APTL/FP&F, and the Penalties Branch of RR/OT.
  notice of arrival in the outer continental shelf--burdensome coast 
                            guard regulation
    Question. For many years, foreign vessels entered the Exclusive 
Economic Zone of the United States to work on the OCS without notifying 
the United States Coast Guard (USCG) in advance, even though 
notification was required for entry into U.S. ports. That changed in 
2006 with the passage of the SAFE Ports Act, which included a provision 
that required foreign vessels to provide information to USCG about 
their crew and cargo at least 24 hours before arriving in the OCS. This 
information is necessary to help USCG maintain Maritime Domain 
Awareness in the strategically vital Outer Continental Shelf of the 
United States (OCS), where critical infrastructure like the Louisiana 
Offshore Oil Port is located.
    Unfortunately though, the Department of Homeland Security (DHS) 
promulgated a final rule in January of this year that imposes the same 
requirement on the domestic fleet, which was never the Congress's 
intention. Whereas foreign vessels are generally only engaged in 
production or construction activities because of the Jones Act, U.S. 
vessels spend a significant amount of time moving equipment and 
personnel between platforms and the shore. Only U.S.-flagged vessels 
are allowed to transport equipment and personnel under the law. In a 
given day, the average platform supply vessel may cross an OCS lease 
block numerous times. Under USCG's existing rules, the vessel would 
have to provide advance notification for each one of these movements. 
Movements are based on fluid operational requirements that industry 
cannot possibly predict in this level of detail. USCG somehow 
determined that this regulation would not significantly impact the U.S. 
economy. Obviously that determination was inaccurate. The existing rule 
is not being enforced because headquarters has not offered guidance 
down the chain of command about how to implement it, and in practice 
many vessels aren't even aware when they cross arbitrarily drawn lease 
block lines in the gulf. This burdensome requirement is impossible to 
implement, it contradicts congressional intent, and it has been leveled 
upon the only part of the U.S. maritime fleet that is growing right 
now. This seems to reflect a fundamental misunderstanding of how the 
offshore industry operates, and it poses a significant threat to energy 
production and economic output in the OCS. Chairman Don Young held a 
hearing in the House Transportation and Infrastructure Committee 
wherein this issue was raised with USCG. And while USCG is not here 
today, DHS is represented, and this is an important issue to the U.S. 
maritime industry that requires the Congress's attention.
    Please discuss the impact of this USCG rule on the offshore energy 
production and the U.S. maritime fleet, and offer any suggestions you 
may have on how USCG may more efficiently achieve its objective to 
obtain Maritime Domain Awareness on the OCS without crippling energy 
production in the process.
    Answer. USCG has issued additional regulations for notice of 
arrival (NOA) for OCS activities in response to security measures as 
required by the SAFE Port Act of 2006. This rulemaking requires owners 
or operators of floating facilities, mobile offshore drilling units, 
and vessels to submit NOA information to the National Vessel Movement 
Center prior to engaging in OCS activities. The amendments are intended 
to enhance maritime security, safety, and environmental protection by 
increasing maritime domain awareness (MDA) on units and personnel 
engaging in OCS activities. USCG published a Notice of Proposed 
Rulemaking in June 2009 and made some adaptations to enhance clarity 
based on the comments received, and no significant impact on energy 
production was or is anticipated. The final rule published in the 
Federal Register on January 13, 2011; effective date is February 14 (76 
Fed. Reg. 2254).
    USCG's intent is to gain compliance from both foreign and domestic 
vessels in order to enhance situational awareness and overall MDA on 
the U.S. OCS. According to industry sources, there are an estimated 
1,500 offshore supply vessels operating on the OCS, often operating in 
close proximity to key components of the Nation's energy 
infrastructure. The information required to be submitted by this final 
rule will greatly assist USCG in evaluating risk associated with OCS 
activities and to manage appropriate resources should a significant 
incident occur (e.g., environmental or national security), and a 
coordinated response is necessary. With this information USCG is better 
able to provide security for the energy infrastructure. For these 
reasons, USCG intends to move forward with the implementation of this 
rule.
    Upon publication and implementation of the final rule, industry 
noted significant concerns. In response, the USCG has initiated a 
redesign of the form used to collect the data, effectively suspending 
enforcement, and convened a working group under the partnership with 
the Offshore Marine Service Association (OMSA) to specifically address 
the design of an OCS-specific reporting form, as well as alternatives 
to the electronic submission of an NOA. USCG has made great strides 
towards creating a process and reporting form that is both workable for 
industry, while also providing USCG the critical information it needs 
to maintain safety and security without impairing the commerce of 
offshore energy production. This form would potentially include: 
creating an offline option; third party vendor option; and an import 
function so that vessels operating on the OCS have the ability to copy, 
save, and email the required information.
    Finally, USCG is committed to working with the regulated public to 
find a way forward, in terms of policy and procedures, which will both 
achieve greater MDA and minimize any regulatory burden.
cooperative enforcement--cbp failure to assess penalties for jones act 
                               violations
    Question. OMSA has created a Jones Act Compliance Program that 
relies upon the United States fleet to be the Nation's ``eyes and 
ears'' in the strategically vital Gulf of Mexico/OCS region. Through 
this program, OMSA monitors the location and movement of every foreign 
vessel in the Gulf of Mexico and provides CBP with regular reports of 
vessels in violation along with photographic evidence.
    This is an excellent example of Government and industry working 
together to accomplish their mutual objectives. After all, CBP does not 
have a large water-borne fleet, and the Coast Guard doesn't have the 
capacity to recognize violations as readily as offshore work crews who 
know the industry best.
    We received testimony a subcommittee hearing that penalties have 
not yet been assessed by CBP in at least six cases of Jones Act 
violations in the Gulf of Mexico, which according to our understanding, 
have been investigated and verified by the agency.
    Please provide information on the status of these cases and the 
date when CBP plans to assess penalties for them.
    Answer. All alleged Jones Act cases are reviewed and investigated 
based on their own merits, beginning at the CBP port of entry level. 
After close consultation between CBP ports of entry, CBP HQ, ICE, and 
USCG, the facts of each case are weighed. If the circumstances disclose 
a violation, CBP may initiate formal penalty proceedings. This includes 
cases referred to CBP by industry partners such as OMSA.
    Currently, several CBP ports of entry located along the Gulf of 
Mexico are pursing potential Jones Act violations as a result of 
information provided by OMSA. A number of ongoing cases are in various 
stages of the penalty administrative process at the CBP port of entry 
level. CBP continues to gather details and evidence on several cases as 
the formal review and approval process advances. CBP feels it would be 
prudent for all current Jones Act cases to be formally reviewed and 
vetted prior to providing further information.
    Question. In CBP's statement, it discusses how easy it is for an 
importer to find and collude with a producer to avoid paying dumping 
duties. It lists some of these schemes including illegal transshipment, 
undervaluation, failure to manifest, and misclassification. If a 
company--or a country--deliberately sets out to engage in these kinds 
of trade fraud, how can the U.S. Government appropriately tackle this 
issue?
    Answer. [A joint response for CBP and ICE follows:]
    Importers of record are responsible for the duties owed to the 
United States for each importation. Currently, the laws of the United 
States allow foreign importers to make importations, and accordingly, a 
foreign importer can be the importer of record. Unfortunately, many 
foreign importers do not pay the required duties, and the U.S. 
Government currently has little recourse to enforce and obtain these 
duties.
    Nonetheless, ICE works closely with CBP to enforce customs laws 
applicable to companies and individuals involved in trade fraud. If an 
ICE special agent has a reasonable suspicion that a company committed 
customs violations, ICE will conduct an investigation to identify, 
detect, and dismantle that company's transshipping to address the 
undervaluing, failure to manifest, and misclassification of imported 
products. ICE's 69 foreign offices assist by obtaining information and 
evidence on foreign investigative targets located in their area of 
responsibility. ICE has also increased its interaction with the private 
sector, and received several useful leads of potential violations from 
U.S.-based industries.
    ICE recognizes that there are many challenges associated with 
conducting an investigation into trade fraud, particularly when the 
target of the investigation is not based in the United States. ICE will 
continue to take a proactive stance to combat these crimes and protect 
the U.S. economy from unfair trade practices. ICE defers to the 
Department of State and the U.S. Trade Representative's Office to 
determine the appropriate actions when another country is suspected of 
deliberately engaging in illegal trade activities.
    The U.S. Government needs a unified approach to appropriately 
tackle this challenging issue, and CBP and ICE are working with our 
partners in other agencies (including DOC) to stop AD/CVD 
circumvention. CBP and ICE are also working with U.S. industry and our 
international partners to develop new sources of information to 
identify AD/CVD circumvention. CBP and ICE are constantly developing 
new approaches to AD/CVD enforcement to meet the challenges posed by 
complex AD/CVD circumvention schemes. We are exploring many options 
that will give us additional information and new tools to protect U.S. 
revenue and identify those who would use our system for illicit gains.
                         product concentration
    Question. CBP reported that uncollected AD duties are highly 
concentrated among a few products (crawfish, fresh garlic, mushrooms, 
honey, and wooden bedroom furniture). These five products represent 
more than 80 percent of the uncollected duties.
    Why are uncollected AD duties concentrated among these products? 
Why don't you focus your limited resources on these products and create 
task forces as was done for textiles?
    Answer. The Department of the Treasury's July 2007 report on Duty 
Collection Problems, Fiscal Year 2003-2006 notes that ``Although a 
particular imported product may be associated with a high default rate 
(for example, crawfish imports), the most likely explanation for the 
varied default rates lies with the type of firms that are importing the 
product. If importers of a particular product are typically lightly 
capitalized firms or parties with minimal assets in the United States, 
one might expect a lower collection rate. For example, when CBP 
reviewed its duty collection program, CBP determined that defaults on 
AD duty supplemental bills (bills issued to collect retroactively 
assessed duties) had increased substantially from previous years. CBP 
also determined that the principal entities responsible for uncollected 
duties were importers of agriculture/aquaculture merchandise subject to 
AD duties. Based on CBP's analysis, 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 1 or more years after the goods had entered), many of the 
companies were no longer in operation. Because the AD 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, CBP recognized the collection issues related to AD/CVD 
agriculture and aquaculture imports, and therefore applied to AD/CVD 
shrimp imports a revised bond policy which increased the bond 
requirements commensurate to the risk of such imports. However, the 
enhanced bond policy was challenged at CIT and at WTO. 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.
    Because of WTO and CIT rulings, CBP has been limited in its ability 
to apply enhanced bonding measures to a broad category of imports (such 
as a single commodity). In addition, under the retrospective AD/CVD 
system, CBP does not know what the final AD/CVD rates will be until 
years after the initial importations, and cannot predict based on the 
initial importation the amount of the final AD/CVD bills, nor the 
ability of the importer to pay the bills.
    CBP staff is reviewing all of the potential scenarios to ensure 
that STBs are required whenever CBP suspects that a risk of revenue 
loss exists for AD/CVD imports.
                         willful circumvention
    Question. As noted in the background section, companies willfully 
circumvent the provisions of the AD/CVD laws by illegally transshipping 
goods through an intermediate destination to mask the true country of 
origin; undervaluing goods to reduce the amount of AD/CVD owed; 
misclassifying or misdescribing merchandise outside the scope of the 
order and, therefore, not subject to AD/CVD; and failing to manifest 
(smuggling) goods. What remedies are there to pursue those who 
willfully circumvent the laws?
    Can the U.S. Government issue--in essence--a ``stop importing'' 
order against the company or the individual? Recognizing it is 
difficult to collect revenues and conduct inspections overseas, what 
can we do to the U.S.-based representatives of these illegal importers?
    Answer. CBP has the statutory authority to assess monetary 
penalties to culpable parties who willfully circumvent the laws 
enforced by CBP. In addition, CBP has the statutory authority to seize 
and forfeit merchandise in cases of inadmissibility into the country. 
CBP also levies duties and imposes certain bonding requirements 
consistent with law and regulations. CBP also refers cases to ICE for 
investigation of criminal violations.
    We are not aware of legal authority on which the U.S. Government 
could rely to prohibit importation generally by a person or company.
    The United States does not have any reciprocal revenue agreements 
with any country in the world. For revenue purposes, even if we know 
that an importer which is not physically present in the United States, 
is viable and operating in another country, CBP cannot go after them to 
collect any revenues.
                                time lag
    Question. According to a 2008 GAO report, there is a 3-year lag 
time by DOC and CBP, between the time goods arrive at the border and 
the final assessment of duties. This lag allows illegitimate importers 
to avoid paying duties by ceasing operations or claiming bankruptcy. 
GAO recommendations to improve duty collection include better 
communications between the agencies, modifying CBP's standards for 
reviewing new shippers, and assessing CBP's process for setting bond 
requirements. What steps have your agency's taken over the past 3 years 
to implement these recommendations?
    CBP also notes that some importers no longer exist by the time CBP 
issues a bill. If we know these companies will disappear, why is there 
a delay in issuing the bill? Can this process be expedited 
administratively or does a law need to be changed?
    Answer. CBP is constantly reviewing its bonding requirements, and 
adjusting these bonding requirements as necessary consistent with its 
statutory authority. CBP has improved communication with DOC through 
the implementation of the ACE system and meeting regularly with DOC. We 
note that DOC, and not CBP, reviews new shippers.
    CBP cannot issue a bill for final AD/CVDs until CBP receives 
instructions from DOC on the final AD/CVD amount. CBP cannot predict 
whether an importer will disappear by the time a bill is issued, which 
according to the GAO in its 2008 report, took on average about 3.3 
years from the date of importation (but could be significantly longer).
    Under the current retrospective AD/CVD scheme, CBP, for its part, 
cannot issue a bill for final AD/CVDs until CBP receives instructions 
from DOC on the final AD/CVD amount.
                             side payments
    Question. The Wall Street Journal reported in February 2011, that 
some U.S. furniture makers have received cash payments from their 
Chinese competitors in exchange for not asking for an AD review. GAO 
similarly found that shrimp exporters made cash payments to the 
domestic U.S. industry.
    What are the agencies' view on the legality of this issue and the 
loss of revenue to the U.S. Treasury as a result of these side 
payments?
    Answer. [A joint response for CBP and ICE follows:]
    ICE defers to the Department of Justice on questions of legality 
and the Department of the Treasury on issues related to loss of 
revenue.
    CBP is not aware of any legal authority that prohibits such ``side 
payments''. For entries prior to October 1, 2007, i.e., subject to the 
Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), any such 
``side payments'' may result in a small loss to the U.S. Treasury to 
the extent that AD duty collections would have exceeded claims for 
disbursement under the CDSOA. For entries after October 1, 2007, i.e., 
after the CDSOA was repealed, any such ``side payments'' would likely 
result in a loss of revenue to the U.S. Treasury. However, no loss may 
occur if DOC proceeds with an AD review for the subject merchandise at 
the request of another party. Regardless of any lost revenue from these 
``side payments'', CBP understands that the primary purpose of the 
dumping laws is intended to be the protection of domestic industries 
from unfair competition, not the generation of revenue to the U.S. 
Treasury.
                        effective communications
    Question. In 2008, GAO reported that there were frequent delays in 
DOC's transmission of liquidation instructions to CBP and that about 80 
percent of the time, DOC failed to send liquidation instructions within 
its self-imposed 15-day deadline.
    How have the agencies improved communication since 2008?
    Answer. In February 2010, CBP launched the AD/CVD Module of CBP's 
Automated Commercial Environment (ACE), which provides a modern 
communication system for CBP to communicate with DOC on AD/CVD 
enforcement. The ACE AD/CVD Module incorporates a joint AD/CVD case 
management, messaging and inquiry system for CBP and DOC. These 
communication systems facilitate coordination between CBP and DOC on 
AD/CVD messaging issues, and reduce delays. CBP personnel also hold 
regular meetings with DOC's Customs Liaison Unit and communicate 
throughout every work day on AD/CVD-related matters, including deemed 
liquidation issues.
    Question. What additional information from DOC or interagency 
processes would help CBP's ability to collect unpaid bills?
    Answer. Under the current retrospective AD/CVD system, any changes 
in information or interagency processes would not compensate for the 
underlying issues (such as time lags between entry and final billing, 
and large increases in final AD/CVD rates) with the retrospective 
system.
                                 ______
                                 
           Question Submitted by Senator Frank R. Lautenberg
    Question. When CBP seizes materials that were illegally imported 
from China, what steps does it take to ensure that such materials do 
not re-enter the U.S. market and further damage the business of other 
legitimate suppliers of such materials?
    Answer. When CBP seizes merchandise that has been illegally 
imported into the United States, if the goods are not legally required 
to be destroyed, they are sold for exportation only, and the terms of 
sale will state that the goods must be exported to a noncontiguous 
country.
                                 ______
                                 
              Questions Submitted by Senator Daniel Coats
    Question. I have requested information on the exact level of 
personnel and funding being used to enforce AD/CVDs, which CBP has 
failed to supply to the subcommittee. Recently, CBP supplied 
information only on the level of effort going towards overall trade 
enforcement and only for fiscal year 2010. Is CBP unable to supply 
basic information about how it spends the resources provided by the 
Congress? Can CBP tell this subcommittee exactly how much was spent on 
AD last fiscal year as compared to each of the previous 5 fiscal years 
and what is requested for fiscal year 2012?
    Answer. CBP takes an agency-wide approach to AD/CVD enforcement, 
and CBP has more than 9,000 employees who are involved in trade 
enforcement, and whose responsibilities may include AD/CVD enforcement. 
These include more than 1,000 employees solely dedicated to the Office 
of International Trade, and other nonuniformed positions including 
attorneys, attaches, auditors, entry specialists, field analytical 
specialists, financial systems specialists, fines, penalties, and 
forfeiture officers, import specialists, and seized property 
specialists. These individuals are augmented by more than 5,000 CBP 
Officers and more than 2,000 agricultural specialists.
    CBP does not specifically track the expenditures being used to 
enforce AD/CVD because this is part of CBP's overall trade enforcement 
responsibilities, and part of the duties of all CBP trade enforcement 
employees. To respond to this question and provide the data requested 
in questions 112, 114, and 115, CBP estimated how much was spent on AD/
CVD enforcement over the last 5 years, a projection for fiscal year 
2011, and how much was requested for fiscal year 2012. The spending 
estimate is based on an estimate of the full-time equivalent (FTE) 
personnel involved in AD/CVD enforcement in fiscal year 2011 and the 
number of FTE personnel requested in fiscal year 2012.
    This estimate includes data on personnel dedicated exclusively or 
almost exclusively to AD/CVD enforcement within the Office of 
International Trade, the Office of Information Technology, and the 
Office of Administration. The estimate also includes data on personnel 
from the Office of Field Operations, based on the total number of hours 
coded for AD/CVD in the Office of Field Operation's activity-based 
costing system, and converted into the corresponding number of FTE 
positions. The Office of Chief Counsel also devotes resources to AD/CVD 
enforcement and has opened 459 AD/CVD cases from fiscal year 2005 to 
present.

                        [In millions of dollars]
------------------------------------------------------------------------
                                                             Estimated
                       Fiscal year                            amount
------------------------------------------------------------------------
2006....................................................              20
2007....................................................              21
2008....................................................              14
2009....................................................              15
2010....................................................              14
2011 (projected)........................................              17
2012 (requested)........................................              18
------------------------------------------------------------------------

    Question. Is the level of resources within the Office of 
International Trade at CBP adequate for enforcement of AD orders? If 
not, what is being spent now and what additional amount is needed? How 
many dollars and personnel are going towards AD this fiscal year? How 
many dollars and personnel are included in the fiscal year 2012 
request?
    Answer. CBP's fiscal year 2012 request for trade enforcement 
resources, including AD/CVD enforcement resources, was included in the 
President's fiscal year 2012 budget request submitted to the Congress.
    In fiscal year 2011, CBP projects spending $17 million, with 172 
FTE, on AD activities.
    In 2012, CBP anticipates filling some vacant positions, which will 
result in spending $18 million with 177 FTE.
    Question. Some of the testimony today has touched on information 
sharing--among Federal agencies as well as with private industry. Is 
CBP able to share information with private industry or rights holders 
when examining or seizing merchandise in intellectual property rights 
(IPR) enforcement cases?
    Answer. Currently, the Trade Secrets Act may be interpreted to 
prevent CBP from sharing certain information, including unredacted 
samples, with right holders prior to seizure. This creates a hurdle for 
CBP's IPR enforcement capabilities because right holders know their 
products better than anyone and can provide valuable information to 
assist with determining the authenticity of suspect goods. CBP worked 
with the Intellectual Property Enforcement Coordinator to develop 
legislative recommendations that will resolve this issue and authorize 
DHS to share information with right holders during examinations and 
prior to seizure. CBP shares the goals set forth in the recent Senate 
bill S. 968, ``Preventing Real Online Threats to Economic Creativity 
and Theft of Intellectual Property Act of 2011''. After seizure, CBP is 
required to share information with rights holders that includes the 
identifying information for the importer and manufacturer if available.
    Question. Last year, CBP submitted a 5-year enforcement strategy to 
reduce IPR violations. What progress has been made in implementing this 
strategy to expand training, improve targeting models, expand post 
audit reviews, and implement an IPR component as a part of the Importer 
Self Assessment program?
    Answer. CBP has been working to implement its 5-year IPR Strategy 
and thanks the Congress for supporting us through funding for IPR in 
the fiscal year 2011 appropriation. CBP envisions an effective IPR 
enforcement process in which legitimate cargo is released without 
delay, IPR infringing goods are intercepted, and violators are deterred 
or put out of business. The Strategy submitted to the Congress 
described a three-pronged strategy for moving toward this vision. It 
laid out objectives to:
  --facilitate entry of legitimate cargo prior to its arrival;
  --to strengthen IPR enforcement as goods arrive at our borders; and
  --to deter future illicit imports by counterfeiters and pirates after 
        goods have arrived.
    CBP has taken steps to carry out this vision by:
  --CBP is reviewing the benefits of developing an IPR component to the 
        Importer Self Assessment program. In addition to looking at 
        this form of partnership program, CBP is exploring other 
        options to partner with the trade community through other types 
        of supply and distribution chain management programs. CBP has 
        been seeking input from the trade community to ensure any 
        program developed from this initiative would not only prove 
        effective in interdicting counterfeit goods, but would also 
        help facilitate legitimate trade.
  --CBP implemented a Pharmaceutical Center for Excellence and 
        Expertise (CEE) pilot on November 1, 2010. Through the CEE, we 
        are partnering with the pharmaceutical industry and gaining 
        intelligence to segment low-risk, trusted importers from those 
        that present higher risk for IPR violations. This allows us to 
        facilitate entry of these low risk shipments without 
        inspection, and frees CBP to focus IPR enforcement resources on 
        inspecting goods entered by high-risk importers.
  --CBP's enforcement methods are based on a risk assessment of 
        incoming shipments to determine the shipments most likely to 
        contain counterfeit goods. CBP is currently modifying its risk 
        model for deployment in the ocean cargo environment to enhance 
        targeting.
  --In addition to updating our risk model, in April 2011, CBP began an 
        admissibility compliance measurement (ACM) program that 
        assesses import compliance rates. The ACM is currently running 
        in international mail and will be implemented in express 
        courier facilities in the fall. CBP plans to administer the ACM 
        in ocean cargo in the first one-half of fiscal year 2012.
  --To better equip officers in our ports of entry to enforce IPR, CBP 
        designed and began providing Integrated IPR Field Training in 
        March 2011. This full-day, live instructor-led course covers 
        IPR policy, law, and operations. CBP is also in the process of 
        recording short training sessions on very specific topics that 
        can be delivered on-demand over the Internet to field 
        personnel.
  --To deter IPR violators postentry, one of the things we are doing is 
        revamping the IPR penalty process. This includes collaboration 
        with ICE to identify assets that could be pursued for 
        collection on IPR penalties.
    CBP formed an internal working group to identify the underlying 
issues that affecting the effectiveness of post entry audits and to 
consider their overall impact on IPR enforcement. Component offices 
within CBP are drafting proposals.
           anti-dumping and countervailing duties enforcement
    Question. What steps are CBP, ICE, and DOC taking to improve 
communication about AD/CVD enforcement efforts with private industry?
    Answer. [A joint response for CBP and ICE follows:]
    CBP refers potentially actionable allegations received from private 
industry to ICE during monthly commercial enforcement and analysis 
response meetings at both headquarters and local field office levels. 
In addition, ICE and CBP regularly conduct meetings with private 
industry at both the headquarters and local office levels to receive 
allegations and concerns regarding AD/CVD enforcement.
    CBP shares industry concerns about the importance of countering AD/
CVD circumvention. We also understand that U.S. industry wants more 
transparency in CBP's AD/CVD circumvention efforts. We are examining 
ways to timely release information to the public about our enforcement 
activities. At the same time, there is necessarily information that we 
cannot make public when there is a criminal case under development. 
Such cases usually require time to develop as CBP, in cooperation with 
ICE, fully investigates and prosecutes the parties that are not 
properly paying their AD/CVDs. Such public prosecution sends a very 
strong message worldwide about the U.S. Government's AD/CVD enforcement 
efforts. All of this notwithstanding, we are taking all necessary steps 
to find ways that will allow us to release information to petitioners 
to make our process more transparent.
    Question. What is the state of information sharing between CBP, 
ICE, and DOC? Are there barriers to sharing information that each 
agency obtains during AD/CVDs investigations and verifications? As an 
example, does CBP have information about shippers that would be useful 
to DOC?
    Answer. [A joint response for CBP and ICE follows:]
    ICE works in close cooperation with relevant interagency partners, 
the private sector, and international counterparts to investigate a 
broad spectrum of crimes related to commercial fraud. Attempts to 
circumvent payments of AD/CVDs may be investigated by ICE based upon 
the multidisciplinary commercial enforcement analysis and response 
(CEAR) process evaluation. CEAR meetings are conducted in most major 
cities throughout the United States on a monthly basis by members of 
ICE and CBP. The purpose of the meetings is to coordinate information 
sharing between ICE and CBP regarding potential trade violations. The 
role of the CEAR process is to make an early determination as to the 
nature, extent, and impact of instances of noncompliance, select the 
response best suited to remedy the problem, and follow up on that 
action to ensure that the noncompliance problem is solved.
    CBP, ICE, and DOC all share extensive information related to AD/CVD 
enforcement, and CBP actively responds to requests for information from 
these agencies. Much of the data sharing relates to specific 
enforcement activities. Additionally, CBP, ICE, and DOC discuss broader 
information sharing efforts to improve AD/CVD enforcement.
    ICE is limited in sharing information concerning ongoing 
investigations with DOC or any other agency outside of DHS due to 
Federal Rules of Criminal Procedure and secrecy requirements placed on 
matters pending before a grand jury.
    DOC AD/CVD orders are issued by DOC and collected and distributed 
by CBP. ICE works closely with DOC and CBP to share noncase-related 
information regarding AD/CVD orders. ICE also actively participates in 
the CBP-led multidisciplinary CEAR process to coordinate information 
sharing between ICE and CBP regarding potential trade violations.
    ICE, as the investigative arm of DHS, is responsible for 
investigating importers who evade the payment of AD/CVD on imported 
merchandise. AD/CVD cases are long-term, transnational investigations 
that require significant coordination between domestic and 
international ICE offices and with foreign law enforcement 
counterparts. ICE special agents also work closely with CBP officers, 
import specialists, and regulatory auditors during AD/CVD 
investigations.
    CBP has no specific barriers to sharing such information with DOC. 
CBP often has information about shippers that would be useful to DOC, 
and shares this information with DOC.
          length of time devoted to reviews and investigations
    Question. Each witness has testified on the length of time it takes 
to do reviews or investigations involving trade enforcement, 
specifically AD/CVDs. In prepared testimony, Deputy Assistant Secretary 
Lorentzen mentions the October 2006 final affirmative determination of 
circumvention of the AD order on petroleum wax candles from China--but 
the complaint alleging possible circumvention was filed in 2004; and 
Deputy Assistant Director Ballman speaks to the case alleging 
transshipment of Chinese honey which began in February 2008 and has 
resulted in fines and prison sentences--but the most significant 
indictments did not come for 2.5 years--until September 2010. What can 
be done to shorten these timeframes so that enforcement has a deterrent 
effect on others across the trade community?
    Answer. [A joint response for CBP and ICE follows:]
    There is an inherent delay in criminal investigations and 
prosecutions involving trade enforcement. ICE criminal investigations 
are the last line of defense against the evasion of AD/CVD. These cases 
are long-term, transnational investigations that require significant 
coordination between domestic and international offices, with foreign 
law enforcement counterparts. By the time ICE investigators are 
involved in a particular case, the alleged violators have already 
committed customs fraud by evading or attempting to evade dumping 
duties. ICE is committed to shortening timeframes wherever possible, 
but many aspects of these investigations, such as the assistance of 
foreign law enforcement counterparts, and the prosecution of cases by 
the United States Attorney's Office, are outside of ICE's control.
    To further deter these types of customs violations and protect U.S. 
business interests in the global economy, the United States Government 
should continue to inform the public and foreign industry, about 
successful prosecutions and awarded penalties resulting from ICE's 
investigations and enforcement actions.
    CBP continues to work with our partner agencies in the Federal 
Government as well as with foreign law enforcement and the private 
sector to bring quick and effective legal actions against those that we 
suspect are circumventing the AD/CVD system. We will continue to build 
the relationships that will help to streamline the process and 
demonstrate our collective efforts as a credible deterrent.
                    uncollected anti-dumping duties
    Question. The Government Accountability Office mentioned in 
testimony the more than $1 billion in AD duties that have not been 
collected. These duties are related primarily to just five products--
honey, fresh garlic, preserved mushrooms, crawfish, and bedroom 
furniture from China. What can be done at this point to collect these 
duties, some of which I believe stretch back to 2004? Some of these 
collections would go back to the U.S. Treasury to finance the 
Government--some would actually go back to these industries that have 
been damaged under the ``Byrd amendment''. I realize that CBP has a 
process it follows for debt collection--which on average can take 300 
days before even referring the case to attorneys--but if some of these 
duties were imposed in 2004, that would be 7 years ago which is a 
considerable length of time beyond 300 days. What exactly is the 
central issue preventing either collection or the liquidation of any 
bonds posted by the importers? Please give us more transparency into 
whether these amounts are collectible; what is the process; and what is 
the plan at DOC and CBP to resolve this situation.
    Answer. CBP is pursuing all of the collection tools available. Most 
of the debts associated with these products are in litigation against 
the surety, principal, or both. Also, the principal would be on 
sanction and they would have immediate suspension of delivery 
privileges.
    The central issue preventing CBP from collecting the full amount of 
the debt is the ease in which a company can exit the market either 
foreign or domestic. While the debt collection process can add a 
significant amount of time to the overall collection process, many 
companies ceased to exist prior to the creation of the debt leaving 
only the surety to pursue in active collection. Collections from the 
surety may result in collecting 10 percent of the overall amount due to 
CBP. Sureties assert many legal justifications to prevent payment to 
CBP which requires legal review from CBP.
    Question. What suggestions do CBP and DOC have to get China to 
focus on solving this problem?
    Answer. CBP continues to work with our partner countries to 
identify areas of common risk and concern. We work through the World 
Customs Organization to identify best practices and to develop common 
action plans. This work with other countries is important to try and 
address the issue of AD/CVD evasion. We will continue to work with our 
Federal partners within the executive branch to ensure that they are 
working with their Chinese colleagues.
                                 ______
                                 
              Questions Submitted to J. Scott Ballman, Jr.
            Questions Submitted by Senator Mary L. Landrieu
              investigations and access to other countries
    Question. How does the process of investigating anti-dumping (AD) 
allegations differ from other Immigration and Customs Enforcement (ICE) 
investigations in terms of time, manpower, and evidence requirements?
    What authority does ICE have to enter a country to conduct an AD 
investigation? Can countries deny you entry and/or access to a company 
with which you have suspicions? If so, what leverage does the U.S. 
Government have to get the country to reconsider its entry denial?
    Answer. AD investigations are long-term, transnational 
investigations. These investigations are also very document-intensive. 
ICE agents expend a substantial amount of time to review numerous 
complex documents (i.e., bank records, import/export documents, and 
foreign customs documents) and verify the information contained in the 
documents.
    AD investigations typically require significant coordination 
between domestic and international offices. If information is needed 
from foreign sources, the legal process to obtain and translate 
evidence from other countries to support a criminal prosecution can 
also be lengthy.
    Additionally, AD rates are determined by the Department of Commerce 
(DOC). Thus, ICE investigations into AD allegations may be impacted if 
the dumping duty rate changes during the course of the investigation. 
This volatility makes AD investigations unique among other ICE 
investigative authorities.
    Because of the complex nature of AD investigations, they are often 
more resource and time intensive than other types of investigations.
    ICE has no authority to conduct a law enforcement investigation 
outside of the jurisdiction of the United States unless ICE obtains 
express permission from a foreign government. ICE has two primary 
methods to request assistance from foreign governments. ICE can submit 
the request through formal legal channels such as customs mutual 
assistance agreements, mutual legal assistance agreements, or letters 
rogatory. ICE may also obtain information through informal channels 
based on relationships with foreign law enforcement officials.
    Yes, countries can deny access. As sovereign nations, foreign 
countries may limit the ability that ICE has to conduct law 
enforcement-related activities and to enter or access a company located 
outside of the United States. ICE has two primary methods to request 
assistance from foreign governments. ICE can submit the request through 
formal legal channels such as customs mutual assistance agreements, 
mutual legal assistance agreements, or letters rogatory. ICE may also 
obtain information through informal channels based on relationships 
with foreign law enforcement officials.
    The Department of Homeland Security (DHS) would defer to the 
Department of State or the U.S. Trade Representative to have the 
country reconsider the denied entry or access.
    Question. In your statement you describe a number of investigative 
cases ICE has conducted in recent years. Of these cases, who/which 
agency brings them to you--CBP? If so, how long does it take CBP to get 
it to ICE after it has come to CBP's attention?
    Does ICE have the authority to initiate investigations on its own 
or must it wait for charges to be brought by CBP and/or DOC?
    Answer. ICE may obtain leads for AD investigations through a 
variety of sources; the majority of the AD cases are received from CBP, 
including those described in the statement given on May 25, 2011. 
Occasionally, AD cases are referred to ICE directly by industry 
representatives. Other possible methods of referral include foreign 
customs services, the ICE tip hotline, and self-generated ICE 
investigations. CBP will make referrals to ICE which may result in a 
new criminal investigation or which may help bolster an existing ICE 
investigation.
    CBP directly refers allegations timely to ICE through the 
commercial enforcement analysis and response (CEAR) process. Local CEAR 
meetings are held on a regular basis and are a platform for referring 
significant trade violations to ICE. In addition, CBP will immediately 
refer egregious or time-sensitive allegations to ICE field offices 
through established communications channels. Contact with ICE can be 
made outside of the monthly CEAR meeting if a significant violation is 
detected and waiting for the monthly meeting might jeopardize the 
investigation. The violation/violator would still be discussed at the 
next meeting to ensure that the appropriate agency decisionmakers agree 
with the course of action selected to address the violation or 
violator.
    ICE's Office of Homeland Security Investigations (HSI) has the 
authority to initiate investigations on its own. ICE HSI's 
investigations are both self-generated and a result of received 
allegations of evasion from sources, to include CBP, industry, foreign 
customs, and law enforcement agencies. The self-generated 
investigations can be the result of information received from criminal 
informants, criminal defendants, current or former employees, 
competitors, other criminal investigations, or observations of HSI 
special agents.
    Question. Over the last 12 months, how many seizures has ICE made 
of merchandise that was entered into the United States in ways meant to 
evade AD/CVD orders?
    Would you agree that AD/CVDs are in place because industry has 
demonstrated that unfair imports are proven--by the independent 
International Trade Commission (ITC)--to be harming American producers?
    Is ICE challenged for resources to enforce the trade laws?
    CBP is responsible for AD/CVD targeting, examinations and revenue 
collection, while ICE investigates possible criminal violations. How 
are CBP and ICE working to coordinate their enforcement activities?
    In your testimony, you gave a couple of examples of high-profile 
arrests and indictments. Generally, how long did it take ICE to build 
these cases?
    How many cases over the past 2 years has ICE spent time examining, 
but not taken to indictment, and how long has this delayed effective 
civil enforcement action to stop the evasion?
    Answer. ICE is responsible for the criminal investigations of cases 
involving evasion of AD/CVD orders. ICE's goal in these investigations 
is to secure criminal charges against suspected violators. Under rare 
circumstances, ICE does conduct seizures of merchandise independent of 
CBP in furtherance of a criminal investigation. From June 1, 2010, to 
May 31, 2011, ICE conducted three seizures consisting of 96 packages of 
polyethylene bags with a domestic value of $230,400; 192 55-gallon 
drums of malt sweetener; and 28,017 aluminum shower door frames and 
profiles with a domestic value of $69,514. All of the seized contraband 
entered the United States through schemes meant to evade AD/CVDs.
    DOC sets the duties for AD. ICE is not involved in the review 
process within the ITC. ICE does not review any evidence or documents 
given to DOC by the industry when reporting AD violations. Once DOC 
makes a determination that a duty should be instituted, CBP collects 
the duties, and ICE, as the investigative arm of DHS, investigates 
allegations of evasion of those duties.
    ICE, as the investigative arm of DHS, is responsible for 
investigating more than 400 criminal offenses related to violations of 
customs and immigration laws to include AD/CVD evasion, intellectual 
property rights, North American Free Trade Agreement, and textile 
violations. Despite such broad authority, ICE aggressively pursues AD/
CVD evasion investigations resulting from viable commercial fraud leads 
regardless of the primary predicate offense. Maintaining the current 
pace, ICE will increase commercial fraud investigations by 
approximately 20 percent in fiscal year 2011. ICE is able to deploy all 
the necessary resources needed to bring an investigation to a 
successful conclusion.
    ICE works closely with CBP to enforce customs laws applicable to 
companies and individuals involved in trade fraud. ICE and CBP 
regularly conduct meetings with private industry to receive allegations 
and discuss concerns regarding AD/CVD enforcement. To better coordinate 
enforcement activities, ICE and CBP also hold a monthly CEAR meeting at 
various ports throughout the United States. Moreover, ICE special 
agents work closely with CBP officers, import specialists, and 
regulatory auditors when developing and pursuing AD/CVD investigations. 
ICE also has a special agent assigned to the CBP Office of 
International Trade to assist them with commercial fraud issues. 
Additionally, the National Intellectual Property Rights Coordination 
Center houses the ICE-led Commercial Fraud Programs Unit with co-
located CBP personnel, which enables improved coordination between ICE 
and CBP.
    The investigations cited in ICE's May 25, 2011, testimony took 
between 16 to 38 months to complete, and one investigation is still 
ongoing. However, each case conducted by ICE involves unique 
circumstances that may shorten or lengthen the time of the case. AD 
investigations, in particular, involve multijurisdictional and 
international components as well as the review of voluminous amounts of 
historical records. As a result, these investigations often take months 
or years to resolve and conclude.
    Delays to civil enforcement actions are often necessary in order to 
effectively conduct a criminal investigation. During the past 2 years, 
ICE conducted 232 AD/CVD investigations, resulting in 40 indictments of 
domestic and international subjects. International arrests present far 
more complex legal hurdles and challenges relating to extradition and 
eventual trial. Investigations that have not been brought to indictment 
may be ongoing, may have been closed, or may have been referred to CBP 
for civil enforcement action.
    As noted in the previous answer, ICE and CBP hold CEAR process 
meetings on a monthly basis at various ports throughout the United 
States to coordinate enforcement activities. Through these meetings and 
routine communication channels, ICE refers any cases that will not be 
taken to criminal indictment back to CBP, allowing CBP to proceed with 
civil enforcement action.
                          investigative effort
    Question. The ICE AD/CVD program is one way that ICE protects U.S. 
businesses from fraudulent trade practices. AD/CVD orders are issued by 
DOC and collected and distributed by CBP. AD duties are assessed when 
importers sell merchandise at less than fair market value, which causes 
material injury to a domestic industry producing a comparable product. 
ICE is responsible for investigating importers who evade payment of AD/
CVD on imported merchandise. These cases are long-term, transnational 
investigations that require significant coordination between domestic 
and international offices and with foreign law enforcement 
counterparts.
    In general, how long does a case take from initiation to 
conclusion? Are there any ways the investigative process can be 
expedited?
    Answer. Each case is unique. Therefore, the amount of time required 
to complete an AD/CVD case will vary due to a number of factors, such 
as whether the case requires information from foreign law enforcement, 
translation of foreign documents, multijurisdictional requirements, and 
the voluminous amounts of historical records that require review. In 
general, these investigations take approximately 1 to 5 years from 
initiation to conclusion.
    AD/CVD cases are complex and often transnational requiring 
significant coordination between domestic and international ICE offices 
and foreign law enforcement counterparts. The unique challenge each of 
these cases presents contributes to the time intensive nature of AD/CVD 
cases. Thus, the amount of time to complete a case may vary from 1 to 5 
years or longer.
    By increasing cooperation between ICE and foreign governments the 
investigative process has been expedited, thus accelerating the 
response time to information requests. Another method used by ICE to 
expedite the investigative process is by conducting site verifications 
of foreign manufacturers to ensure that the country of origin 
information reported in customs documents is accurate.
    Question. In some cases, after ICE has invested resources in 
developing a case and final finding of liability, some of these fly-by-
night importers may have disappeared altogether, and the bond they got 
doesn't come close to covering their final liability.
    How often do you encounter this problem?
    What is your investigative threshold for investigating these types 
of matters?
    How often do you have to decide not to pursue a case because you 
lack the necessary information or resources?
    Answer. Although CBP is responsible for the assessment and 
collection of duties, ICE regularly encounters fly-by-night importers 
during investigations. Many of these companies were established in the 
United States by people who have few, if any, ties to the United 
States. Their corporate addresses are often post office boxes or other 
locations that provide limited investigative leads. Moreover, importers 
are not required to have a U.S. address, making it difficult to verify 
the information that they submit to CBP. This allows the importer to 
evade paying duties with little or no recourse for the U.S. Government.
    Operation Mirage provides an example of how ICE has used its trade 
fraud authority to combat fly-by-night importers. ICE and CBP conducted 
Operation Mirage in 2009, targeting 176 importers of record identified 
as having potential involvement with the undervaluation of textile 
products imported from the People's Republic of China. Of the 176, ICE 
and CBP identified 90 importers of record who either did not have a 
legitimate interest in the goods, or were fictitious importers. These 
efforts resulted in 32 investigations. While ICE does not have specific 
data regarding a similar AD operation, the percentages would likely be 
consistent across the board, as similar smuggling and illegal 
importation schemes are utilized in both textile smuggling and AD 
investigations.
    Prior to opening a criminal case, ICE must verify the information 
related to AD allegations made either by CBP or private industry. ICE 
special agents calculate a projection of the loss of revenue to the 
United States to demonstrate whether the loss exceeds the prosecution 
threshold set by the local United States Attorney's Office (USAO).
    ICE does not set the threshold of amounts for criminal 
prosecutions. The USAO independently set thresholds for prosecution and 
ICE is bound by the USAO recommendations. These thresholds vary from 
USAO district to district.
    ICE does not set a threshold for investigating civil cases but the 
loss of revenue to the Federal Government is weighed against the 
available manpower at the specific ICE office, case load restraints, 
and prosecutorial discretion.
    ICE does not maintain statistics on unopened cases. ICE 
investigates potential AD/CVD violations only when it has a reasonable 
suspicion to believe that the information provided may result in an 
enforcement action (arrest, indictment, conviction, seizure, fine, or 
forfeiture). If a lead is viable, cases opened by ICE are investigated 
to the fullest extent possible based on the resources available. Some 
of the possible actions taken in furtherance of an AD/CVD case may 
include reviewing United States and foreign shipping documents, 
conducting interviews, and working with CBP officers to inspect 
shipments and to examine comparable samples of imported material from 
source countries at CBP laboratories to determine country of origin. 
All ICE cases are opened to determine the facts of any potential 
violation, to include AD/CVD investigations.
    Question. In CBP's statement, it discusses how easy it is for an 
importer to find and collude with a producer to avoid paying dumping 
duties. It lists some of these schemes including illegal transshipment, 
undervaluation, failure to manifest, and misclassification. If a 
company--or a country--deliberately sets out to engage in these kinds 
of trade fraud, how can the U.S. Government appropriately tackle this 
issue?
    Answer. [A joint response for ICE and CBP follows:]
    Importers of record are responsible for the duties owed to the 
United States for each importation. Currently, the laws of the United 
States allow foreign importers to make importations, and accordingly, a 
foreign importer can be the importer of record. Unfortunately, many 
foreign importers do not pay the required duties, and the U.S. 
Government currently has little recourse to enforce and obtain these 
duties.
    Nonetheless, ICE works closely with CBP to enforce customs laws 
applicable to companies and individuals involved in trade fraud. If an 
ICE special agent has a reasonable suspicion that a company committed 
customs violations, ICE will conduct an investigation to identify, 
detect, and dismantle that company's transshipping to address the 
undervaluing, failure to manifest, and misclassification of imported 
products. ICE's 69 foreign offices assist by obtaining information and 
evidence on foreign investigative targets located in their area of 
responsibility. ICE has also increased its interaction with the private 
sector, and received several useful leads of potential violations from 
U.S.-based industries.
    ICE recognizes that there are many challenges associated with 
conducting an investigation into trade fraud, particularly when the 
target of the investigation is not based in the United States. ICE will 
continue to take a proactive stance to combat these crimes and protect 
the U.S. economy from unfair trade practices. ICE defers to the 
Department of State and the U.S. Trade Representative's Office to 
determine the appropriate actions when another country is suspected of 
deliberately engaging in illegal trade activities.
    The U.S. Government needs a unified approach to appropriately 
tackle this challenging issue, and CBP and ICE are working with our 
partners in other agencies (including DOC) to stop AD/CVD 
circumvention. CBP and ICE are also working with U.S. industry and our 
international partners to develop new sources of information to 
identify AD/CVD circumvention. CBP and ICE are constantly developing 
new approaches to AD/CVD enforcement to meet the challenges posed by 
complex AD/CVD circumvention schemes. We are exploring many options 
that will give us additional information and new tools to protect U.S. 
revenue and identify those who would use our system for illicit gains.
                         product concentration
    Question. CBP reported that uncollected AD duties are highly 
concentrated among a few products (crawfish, fresh garlic, mushrooms, 
honey, and wooden bedroom furniture). These five products represent 
more than 80 percent of the uncollected duties.
    Why are uncollected AD duties concentrated among these products? 
Why don't you focus your limited resources on these products and create 
task forces as was done for textiles?
    Answer. [A joint response for ICE and CBP follows:]
    The Department of the Treasury's July 2007 report on Duty 
Collection Problems, Fiscal Year 2003-2006 notes that ``Although a 
particular imported product may be associated with a high default rate 
(for example, crawfish imports), the most likely explanation for the 
varied default rates lies with the type of firms that are importing the 
product. If importers of a particular product are typically lightly 
capitalized firms or parties with minimal assets in the United States, 
one might expect a lower collection rate. For example, when CBP 
reviewed its duty collection program, CBP determined that defaults on 
AD duty supplemental bills (bills issued to collect retroactively 
assessed duties) had increased substantially from previous years. CBP 
also determined that the principal entities responsible for uncollected 
duties were importers of agriculture/aquaculture merchandise subject to 
AD duties. Based on CBP's analysis, 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 1 or more years after the goods had entered), many of the 
companies were no longer in operation. Because the AD 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, CBP recognized the collection issues related to AD/CVD 
agriculture and aquaculture imports, and therefore applied to AD/CVD 
shrimp imports a revised bond policy which 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). 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.
    Because of WTO and CIT rulings, CBP has been limited in its ability 
to apply enhanced bonding measures to a broad category of imports (such 
as a single commodity). In addition, under the retrospective AD/CVD 
system, CBP does not know what the final AD/CVD rates will be until 
years after the initial importations, and cannot predict based on the 
initial importation the amount of the final AD/CVD bills, nor the 
ability of the importer to pay the bills.
    CBP staff is reviewing all of the potential scenarios to ensure 
that single-transaction bonds are required whenever CBP suspects that a 
risk of revenue loss exists for AD/CVD imports.
                         willful circumvention
    Question. As noted in the background section, companies willfully 
circumvent the provisions of the AD/CVD laws by illegally transshipping 
goods through an intermediate destination to mask the true country of 
origin; undervaluing goods to reduce the amount of AD/CVD owed; 
misclassifying or misdescribing merchandise outside the scope of the 
order and, therefore, not subject to AD/CVD; and failing to manifest 
(smuggling) goods. What remedies are there to pursue those who 
willfully circumvent the laws?
    Can the U.S. Government issue--in essence--a ``stop importing'' 
order against the company or the individual? Recognizing it is 
difficult to collect revenues and conduct inspections overseas, what 
can we do to the U.S.-based representatives of these illegal importers?
    Answer. [A joint response for ICE and CBP follows:]
    CBP has the statutory authority to assess monetary penalties to 
culpable parties who willfully circumvent the laws enforced by CBP. In 
addition, CBP has the statutory authority to seize and forfeit 
merchandise in cases of inadmissibility into the country. CBP also 
levies duties and imposes certain bonding requirements consistent with 
law and regulations. CBP also refers cases to ICE for investigation of 
criminal violations.
    We are not aware of legal authority on which the U.S. Government 
could rely to prohibit importation generally by a person or company.
    The United States does not have any reciprocal revenue agreements 
with any country in the world. For revenue purposes, even if we know 
that an importer which is not physically present in the United States, 
is viable and operating in another country, CBP cannot go after them to 
collect any revenues.
                                time lag
    Question. According to a 2008 GAO report, there is a 3-year lag 
time by DOC and CBP, between the time goods arrive at the border and 
the final assessment of duties. This lag allows illegitimate importers 
to avoid paying duties by ceasing operations or claiming bankruptcy. 
GAO recommendations to improve duty collection include better 
communications between the agencies, modifying CBP's standards for 
reviewing new shippers, and assessing CBP's process for setting bond 
requirements. What steps have your agency's taken over the past 3 years 
to implement these recommendations?
    CBP also notes that some importers no longer exist by the time CBP 
issues a bill. If we know these companies will disappear, why is there 
a delay in issuing the bill? Can this process be expedited 
administratively or does a law need to be changed?
    Answer. [A joint response for ICE and CBP follows:]
    CBP is constantly reviewing its bonding requirements, and adjusting 
these bonding requirements as necessary consistent with its statutory 
authority. CBP has improved communication with DOC through the 
implementation of the ACE system and meeting regularly with DOC. We 
note that DOC, and not CBP, reviews new shippers.
    CBP cannot issue a bill for final AD/CVDs until CBP receives 
instructions from DOC on the final AD/CVD amount. CBP cannot predict 
whether an importer will disappear by the time a bill is issued, which 
according to the GAO in its 2008 report, took on average about 3.3 
years from the date of importation (but could be significantly longer).
    Under the current retrospective AD/CVD scheme, CBP, for its part, 
cannot issue a bill for final AD/CVDs until CBP receives instructions 
from DOC on the final AD/CVD amount.
                             side payments
    Question. The Wall Street Journal reported in February 2011, that 
some United States furniture makers have received cash payments from 
their Chinese competitors in exchange for not asking for an AD review. 
GAO similarly found that shrimp exporters made cash payments to the 
domestic U.S. industry.
    What are the agencies' view on the legality of this issue and the 
loss of revenue to the U.S. Treasury as a result of these side 
payments?
    Answer. [A joint response for ICE and CBP follows:]
    ICE defers to the Department of Justice on questions of legality 
and the Department of the Treasury on issues related to loss of 
revenue.
    CBP is not aware of any legal authority that prohibits such ``side 
payments''. For entries prior to October 1, 2007, i.e., subject to the 
Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), any such 
``side payments'' may result in a small loss to the U.S. Treasury to 
the extent that AD duty collections would have exceeded claims for 
disbursement under the CDSOA. For entries after October 1, 2007, i.e., 
after the CDSOA was repealed, any such ``side payments'' would likely 
result in a loss of revenue to the U.S. Treasury. However, no loss may 
occur if DOC proceeds with an AD review for the subject merchandise at 
the request of another party. Regardless of any lost revenue from these 
``side payments'', CBP understands that the primary purpose of the 
dumping laws is intended to be the protection of domestic industries 
from unfair competition, not the generation of revenue to the U.S. 
Treasury.
                        effective communications
    Question. In 2008, GAO reported that there were frequent delays in 
DOC's transmission of liquidation instructions to CBP and that about 80 
percent of the time, DOC failed to send liquidation instructions within 
its self-imposed 15-day deadline.
    How have the agencies improved communication since 2008?
    Answer. [A joint response for ICE and CBP follows:]
    In February 2010, CBP launched the AD/CVD Module of CBP's Automated 
Commercial Environment (ACE), which provides a modern communication 
system for CBP to communicate with DOC on AD/CVD enforcement. The ACE 
AD/CVD Module incorporates a joint AD/CVD case management, messaging 
and inquiry system for CBP and DOC. These communication systems 
facilitate coordination between CBP and DOC on AD/CVD messaging issues, 
and reduce delays. CBP personnel also hold regular meetings with DOC's 
Customs Liaison Unit and communicate throughout every work day on AD/
CVD-related matters, including deemed liquidation issues.
                                 ______
                                 
           Question Submitted by Senator Frank R. Lautenberg
    Question. An investigation by the Department of Homeland Security 
(DHS) and U.S. Customs and Border Protection (CBP) found a deliberate 
scheme by the company ESM to illegally import magnesium powder, a 
critical component in the production of infrared countermeasure flares, 
thereby circumventing payment of anti-dumping duties. How do DHS and 
CBP intend to guard against the unlawful importation into the United 
States of hazardous materials with potential military applications? 
Does CBP have sufficient remedies against those who attempt to 
unlawfully import potentially dangerous materials in large volumes 
(i.e., multiple container loads)? If not, what additional remedies are 
needed?
    Answer. Hazardous material importations with a military application 
may require a license or permit. For those goods where a license or 
permit is required, CBP would ensure the proper documents are in place 
prior to releasing the shipment from CBP custody.
    CBP uses its resources to ensure that dangerous materials 
regardless of volume do not enter into the United States. CBP has 
comprehensive plans to inspect targeted goods that pose a threat. Upon 
discovery of dangerous materials, CBP would use locally available 
resources as well as national expertise to properly deal with the 
cargo.
                                 ______
                                 
              Questions Submitted by Senator Daniel Coats
    Question. It is my understanding that within the resources 
available to ICE to conduct AD/CVDs investigations, Commercial Fraud 
receives on average about 5 percent of the total dollars each year. 
Commercial Fraud covers 24 areas, one of which is AD/CVD enforcement. 
Within Commercial Fraud what personnel, full-time equivalents (FTEs), 
and dollars were devoted to AD/CVD enforcement for each of fiscal years 
2009 and 2010, planned for fiscal year 2011, and requested for fiscal 
year 2012?
    Answer. The following table provides the total numbers of FTE 
personnel and dollars expended on AD/CVD enforcement activities for 
fiscal year 2009 and fiscal year 2010 and the projected expenditures 
for fiscal year 2011. No additional resources are requested in fiscal 
year 2012.

------------------------------------------------------------------------
                                           Investigative
                                             full-time     Investigative
                                            equivalent        program
                                             personnel     expenditures
------------------------------------------------------------------------
Fiscal year 2009........................              12      $3,108,000
Fiscal year 2010........................              12       2,863,000
Fiscal year 2011 (full-year projected)..              12       2,961,000
------------------------------------------------------------------------
Note.--Individual ICE Homeland Security Investigations special agents
  are not permanently assigned to any specific case type or workload and
  these FTE levels do not represent fixed allocations from year to year
  to a specific investigative mission area. The actual expenditures and
  level of investigative FTE in any specific investigative area may vary
  significantly due to changing threats to public safety or national
  security and/or mission re-prioritization by a higher authority.

    Question. ICE has many responsibilities; however, it is hard to see 
how ICE is putting any priority on trade enforcement when so few 
dollars (5 percent) are being used to investigate it. Trade and customs 
enforcement is important work. Trade enforcement is not shared with 
other Federal law enforcement agencies. These investigations are not 
the responsibility of the Drug Enforcement Agency, the Secret Service, 
or the Bureau of Alcohol, Tobacco and Firearms--but ICE's 
responsibility. How does ICE justify putting such a small level of 
resources into Commercial Fraud, and such a small level of resources 
into AD/CVD enforcement?
    Answer. As the investigative arm of DHS, ICE is responsible for 
investigating more than 400 criminal offenses related to violations of 
customs and immigration laws, which includes more than 20 commercial 
fraud related violations. ICE aggressively pursues commercial fraud 
cases, investigating all viable commercial fraud leads, regardless of 
the primary predicate offense. ICE is currently on pace to increase its 
commercial fraud arrests by nearly 70 percent in fiscal year 2011.
    Question. Does ICE have agents and other personnel outside of 
Commercial Fraud dedicated to AD/CVD enforcement? If so, how many? 
Provide numbers of personnel, FTEs, and dollars for each of fiscal 
years 2009 and 2010, planned for fiscal year 2011, and requested for 
fiscal year 2012.
    Answer. ICE Homeland Security Investigations (HSI) commercial fraud 
investigative groups investigate a wide range of illegal activities, 
including AD/CVD enforcement. HSI has commercial fraud groups in each 
of its 26 Special Agent in Charge (SAC) offices. Each SAC office 
regularly evaluates personnel assignments to effectively allocate 
resources to address the broad range of criminal violations HSI is 
responsible for investigating.
    The following table provides the total numbers of FTE personnel and 
dollars expended on trade enforcement for fiscal year 2009 and fiscal 
year 2010 and the projected expenditures for fiscal year 2011. No 
additional resources are requested in fiscal year 2012.

------------------------------------------------------------------------
                                           Investigative
                                             full-time     Investigative
                                            equivalent        program
                                             personnel     expenditures
------------------------------------------------------------------------
Fiscal year 2009........................             271     $72,362,000
Fiscal year 2010........................             269      71,787,000
Fiscal year 2011 (full-year projected)..             335      81,884,000
------------------------------------------------------------------------
Note.--Individual ICE Homeland Security Investigations special agents
  are not permanently assigned to any specific case type or workload and
  these FTE levels do not represent fixed allocations from year to year
  to a specific investigative mission area. The actual expenditures and
  level of investigative FTE in any specific investigative area may vary
  significantly due to changing threats to public safety or national
  security and/or mission re-prioritization by a higher authority.

    Question. How is ICE working to coordinate its enforcement 
activities with CBP? Does CBP have to hold off on taking administrative 
actions while ICE is pursuing an investigation? How long is the delay 
between a final determination from ICE and CBP being able to take 
action? Is ICE communicating with CBP in a timely fashion when an 
investigation is concluded?
    Answer. ICE works closely with CBP to enforce customs laws 
applicable to companies and individuals involved in trade fraud. ICE 
and CBP regularly conduct meetings with private industry to receive 
allegations and discuss concerns regarding AD/CVD enforcement. To 
better coordinate enforcement activities, ICE and CBP also hold a 
monthly CEAR meeting at various ports throughout the United States.
    Moreover, ICE special agents work closely with CBP officers, import 
specialists, and regulatory auditors when developing and pursuing AD/
CVD investigations. ICE also has a special agent assigned to the CBP 
Office of International Trade to assist them with commercial fraud 
issues. Additionally, the National Intellectual Property Rights 
Coordination Center houses the ICE-led Commercial Fraud Programs Unit 
with co-located CBP personnel, which enables improved coordination 
between ICE and CBP.
    CBP and ICE work closely on most, if not all, AD investigations. 
CBP does not pursue administrative actions independently while ICE is 
pursuing a criminal case. CBP may postpone a civil enforcement action 
until ICE has completed its investigation. This CBP action, or 
inaction, is to ensure that CBP's administrative process does not 
jeopardize a criminal investigation. The appropriate enforcement action 
is determined on a case-by-case basis and is closely coordinated 
through the local CEAR groups to ensure that the right enforcement 
actions, whether criminal or civil, are taken at the right time as to 
not hinder either process.
    ICE notifies CBP of criminal investigations within 1 month of CBP 
referrals. These notifications are made either through the formal CEAR 
process or through informal notification. ICE does not maintain 
statistical data on actions taken by CBP if a case is pursued for civil 
penalties.
    Through monthly CEAR meetings, ICE and CBP share information 
related to violations concerning both agencies. Additionally, ICE and 
CBP personnel communicate regularly during criminal investigations and 
ICE often shares information with CBP personnel informally at the 
conclusion of an investigation. ICE notifies CBP of criminal 
investigations within a month of CBP referrals. These notifications are 
made either through the formal CEAR process or through informal 
notification.
                      intellectual property rights
    Question. The National Intellectual Property Rights Coordination 
Center (IPR Center) is located within ICE, but is staffed by many 
different Federal agencies. In the past there have been significant 
issues with staffing the Center and gaining the cooperation of the 
partner agencies. Have those issues been resolved?
    Answer. The IPR Center brings together 16 key Federal investigative 
agencies, Interpol, and the Governments of Canada and Mexico in a task 
force setting. The task force structure enables the IPR Center to 
efficiently and effectively leverage the resources, skills, and 
authorities of each participating agency and provide a comprehensive 
response to intellectual property (IP) theft.
    Cooperation among IPR Center partners has continued to grow over 
the past year, with member agencies participating in several joint 
operations and investigations. This cooperation includes the recently 
announced Operation Chain Reaction in which nine IPR Center partner 
agencies and prosecutors from DOJ are working together to target 
counterfeit items entering the supply chains of the Department of 
Defense and other U.S. Government agencies.
    In addition, the IPR Center has recently added several agencies to 
more comprehensively address the mission of the IPR Center to combat 
predatory and unfair trade practices that threaten our economic 
stability and national security, restrict the competitiveness of U.S. 
industry in world markets, and place the public's health and safety at 
risk.
    Thus far in 2011, the IPR Center has welcomed the following 
partners:
  --the U.S. Consumer Product Safety Commission;
  --the Defense Logistics Agency Office of Inspector General;
  --the Department of State Office of International Intellectual 
        Property Enforcement;
  --the Air Force Office of Special Investigations;
  --the National Aeronautics and Space Administration Office of the 
        Inspector General; and
  --our third international partner, the Royal Canadian Mounted Police.
    While DOJ is not an official partner at the IPR Center, Federal 
prosecutors work closely with all agency partners at the IPR Center; 
this close relationship has resulted in a one-stop shop for industry 
and victims of IP theft, reducing duplication and allowing us to 
leverage and benefit from our unique missions and areas of expertise.
           anti-dumping and countervailing duties enforcement
    Question. What steps are CBP, ICE, and DOC taking to improve 
communication about AD/CVD enforcement efforts with private industry?
    Answer. [A joint response for ICE and CBP follows:]
    CBP refers potentially actionable allegations received from private 
industry to ICE during monthly commercial enforcement and analysis 
response meetings at both headquarters and local field office levels. 
In addition, ICE and CBP regularly conduct meetings with private 
industry at both the headquarters and local office levels to receive 
allegations and concerns regarding AD/CVD enforcement.
    CBP shares industry concerns about the importance of countering AD/
CVD circumvention. We also understand that U.S. industry wants more 
transparency in CBP's AD/CVD circumvention efforts. We are examining 
ways to timely release information to the public about our enforcement 
activities. At the same time, there is necessarily information that we 
cannot make public when there is a criminal case under development. 
Such cases usually require time to develop as CBP, in cooperation with 
ICE, fully investigates and prosecutes the parties that are not 
properly paying their AD/CVDs. Such public prosecution sends a very 
strong message worldwide about the U.S. Government's AD/CVD enforcement 
efforts. All of this notwithstanding, we are taking all necessary steps 
to find ways that will allow us to release information to petitioners 
to make our process more transparent.
    Question. What is the state of information sharing between CBP, 
ICE, and DOC? Are there barriers to sharing information that each 
agency obtains during AD/CVDs investigations and verifications? As an 
example, does CBP have information about shippers that would be useful 
to DOC?
    Answer. [A joint response for ICE and CBP follows:]
    ICE works in close cooperation with relevant interagency partners, 
the private sector, and international counterparts to investigate a 
broad spectrum of crimes related to commercial fraud. Attempts to 
circumvent payments of AD/CVDs may be investigated by ICE based upon 
the multidisciplinary CEAR process evaluation. CEAR meetings are 
conducted in most major cities throughout the United States on a 
monthly basis by members of ICE and CBP. The purpose of the meetings is 
to coordinate information sharing between ICE and CBP regarding 
potential trade violations. The role of the CEAR process is to make an 
early determination as to the nature, extent, and impact of instances 
of noncompliance, select the response best suited to remedy the 
problem, and follow up on that action to ensure that the noncompliance 
problem is solved.
    CBP, ICE, and DOC all share extensive information related to AD/CVD 
enforcement, and CBP actively responds to requests for information from 
these agencies. Much of the data sharing relates to specific 
enforcement activities. Additionally, CBP, ICE, and DOC discuss broader 
information sharing efforts to improve AD/CVD enforcement.
    ICE is limited in sharing information concerning ongoing 
investigations with DOC or any other agency outside of DHS due to 
Federal Rules of Criminal Procedure and secrecy requirements placed on 
matters pending before a grand jury.
    DOC AD/CVD orders are issued by DOC and collected and distributed 
by CBP. ICE works closely with DOC and CBP to share noncase-related 
information regarding AD/CVD orders. ICE also actively participates in 
the CBP-led multidisciplinary CEAR process to coordinate information 
sharing between ICE and CBP regarding potential trade violations.
    ICE, as the investigative arm of DHS, is responsible for 
investigating importers who evade the payment of AD/CVD on imported 
merchandise. AD/CVD cases are long-term, transnational investigations 
that require significant coordination between domestic and 
international ICE offices and with foreign law enforcement 
counterparts. ICE special agents also work closely with CBP officers, 
import specialists, and regulatory auditors during AD/CVD 
investigations.
    CBP has no specific barriers to sharing such information with DOC. 
CBP often has information about shippers that would be useful to DOC, 
and shares this information with DOC.
          length of time devoted to reviews and investigations
    Question. Each witness has testified on the length of time it takes 
to do reviews or investigations involving trade enforcement, 
specifically AD/CVDs. In prepared testimony, Deputy Assistant Secretary 
Lorentzen mentions the October 2006 final affirmative determination of 
circumvention of the AD order on petroleum wax candles from China--but 
the complaint alleging possible circumvention was filed in 2004; and 
Deputy Assistant Director Ballman speaks to the case alleging 
transshipment of Chinese honey which began in February 2008 and has 
resulted in fines and prison sentences--but the most significant 
indictments did not come for 2.5 years--until September 2010. What can 
be done to shorten these timeframes so that enforcement has a deterrent 
effect on others across the trade community?
    Answer. [A joint response for ICE and CBP follows:]
    There is an inherent delay in criminal investigations and 
prosecutions involving trade enforcement. ICE criminal investigations 
are the last line of defense against the evasion of AD/CVD. These cases 
are long-term, transnational investigations that require significant 
coordination between domestic and international offices, with foreign 
law enforcement counterparts. By the time ICE investigators are 
involved in a particular case, the alleged violators have already 
committed customs fraud by evading or attempting to evade dumping 
duties. ICE is committed to shortening timeframes wherever possible, 
but many aspects of these investigations, such as the assistance of 
foreign law enforcement counterparts, and the prosecution of cases by 
the United States Attorney's Office, are outside of ICE's control.
    To further deter these types of customs violations and protect U.S. 
business interests in the global economy, the U.S. Government should 
continue to inform the public and foreign industry, about successful 
prosecutions and awarded penalties resulting from ICE's investigations 
and enforcement actions.
    CBP continues to work with our partner agencies in the Federal 
Government as well as with foreign law enforcement and the private 
sector to bring quick and effective legal actions against those that we 
suspect are circumventing the AD/CVD system. We will continue to build 
the relationships that will help to streamline the process and 
demonstrate our collective efforts as a credible deterrent.
                    uncollected anti-dumping duties
    Question. The GAO mentioned in testimony the more than $1 billion 
in AD duties that have not been collected. These duties are related 
primarily to just five products--honey, fresh garlic, preserved 
mushrooms, crawfish, and bedroom furniture from China. What can be done 
at this point to collect these duties, some of which I believe stretch 
back to 2004? Some of these collections would go back to the U.S. 
Treasury to finance the Government--some would actually go back to 
these industries that have been damaged under the ``Byrd amendment''. I 
realize that CBP has a process it follows for debt collection--which on 
average can take 300 days before even referring the case to attorneys--
but if some of these duties were imposed in 2004, that would be 7 years 
ago which is a considerable length of time beyond 300 days. What 
exactly is the central issue preventing either collection or the 
liquidation of any bonds posted by the importers? Please give us more 
transparency into whether these amounts are collectible; what is the 
process; and what is the plan at DOC and CBP to resolve this situation.
    Answer. [A joint response for ICE and CBP follows:]
    CBP is pursuing all of the collection tools available. Most of the 
debts associated with these products are in litigation against the 
surety, principal, or both. Also, the principal would be on sanction 
and they would have immediate suspension of delivery privileges.
    Some of these collections would go back to the U.S. Treasury to 
finance the Government--some would actually go back to these industries 
that have been damaged under the ``Byrd amendment''. I realize that CBP 
has a process it follows for debt collection--which on average can take 
300 days before even referring the case to attorneys--but if some of 
these duties were imposed in 2004, that would be 7 years ago which is a 
considerable length of time beyond 300 days.
    The central issue preventing CBP from collecting the full amount of 
the debt is the ease in which a company can exit the market either 
foreign or domestic. While the debt collection process can add a 
significant amount of time to the overall collection process, many 
companies ceased to exist prior to the creation of the debt leaving 
only the surety to pursue in active collection. Collections from the 
surety may result in collecting 10 percent of the overall amount due to 
CBP. Sureties assert many legal justifications to prevent payment to 
CBP which requires legal review from CBP.
    Question. What suggestions do CBP and DOC have to get China to 
focus on solving this problem?
    Answer. [A joint response for ICE and CBP follows:]
    CBP continues to work with our partner countries to identify areas 
of common risk and concern. We work through the World Customs 
Organization to identify best practices and to develop common action 
plans. This work with other countries is important to try and address 
the issue of AD/CVD evasion. We will continue to work with our Federal 
partners within the executive branch to ensure that they are working 
with their Chinese colleagues.
                                 ______
                                 
                Questions Submitted to Ronald Lorentzen
            Questions Submitted by Senator Mary L. Landrieu
                         chinese circumvention
    Question. In your testimony, you mentioned that the Department of 
Commerce (DOC) is currently investigating several allegations of 
circumvention. Of those, how many involve products from China. 
Circumvention appears to be a China-centric problem.
    Should we have a specific solution to deal with China?
    Answer. Although there are many allegations of circumvention 
involving products from China, attempts at circumvention of our anti-
dumping and countervailing duty (AD/CVD) orders are not limited to any 
particular country. Any laws or regulations pertaining to circumvention 
should be broad enough to address circumvention in any instance.
    What more should we be doing to ensure that products from China do 
not continue to circumvent and evade our trade laws?
    Answer. In our bilateral discussions with foreign governments we 
must stress the importance of adherence to and enforcement of our trade 
laws. DOC will continue to work in close cooperation with Customs and 
Border Protection (CBP), Immigration and Customs Enforcement (ICE), and 
the Department of Justice to improve information sharing and 
communication, assist in each others' investigations, and improve our 
enforcement procedures.
                          issuing duty orders
    Question. In your testimony, you discuss the process by which you 
issue AD orders and annually review the entries from the previous year 
to determine the actual level of dumping or subsidization during the 
prior 1-year period. Is this process as expeditious as it can be? Can 
DOC further improve its process to be more responsive to the concerns 
of U.S. industries?
    Answer. DOC requires complete use of the time allotted by the 
statute in which to gather information and provide all interested 
parties the opportunity to comment and participate meaningfully in the 
administrative review process. These proceedings are conducted as 
expeditiously as possible within existing timeframes, but their 
complexity and the need to reach legally defensible outcomes results in 
few instances in which we can finish our work early. However, DOC 
successfully issues all its preliminary and final results in AD/CVD 
reviews within the statutory deadlines.
    Question. In your testimony, you discuss an investigation of 
Chinese tissue paper which resulted in DOC directing CBP to suspend 
liquidation and collect cash deposits. When the liquidation suspension 
order is issued, does it give the violating company time to 
``disappear'', or is it automatic?
    Answer. Once the preliminary affirmative determination of 
circumvention (preliminary determination) in this case was published in 
the Federal Register, liquidation was suspended retroactive to the date 
the circumvention investigation was initiated by DOC. Any subject 
entries which entered prior to the publication of the preliminary 
determination in the Federal Register will be reclassified by CBP as 
AD/CVD entries and suspended from liquidation and the importer will be 
asked to post cash deposits. While I cannot speculate as to the 
possibility of an importer ``disappearing'' and not paying the required 
cash deposit, any entries on or after the date of publication of the 
preliminary determination will automatically require the posting of 
cash deposits equal to the PRC-wide rate of 112.64 percent.
    Question. I understand you have the ability to share information 
from your proceedings with CBP, and CBP has the same ability. Do you 
view the current level of information-sharing as adequate?
    Answer. Both DOC and CBP willingly share information. However, the 
sharing of information may be restricted by existing law.
    In AD/CVD proceedings, pursuant to 19 U.S.C. 1677f(b)(1)(A)(ii), 
DOC may disclose proprietary information that it receives ``to an 
officer or employee of the United States Customs Service who is 
directly involved in conducting an investigation regarding fraud under 
this subtitle''. In light of the new and different factual scenarios 
that DOC and CBP must evaluate and respond to, the Congress may wish to 
evaluate whether the linkage to a fraud investigation is the 
appropriate statutory standard.
    CBP regularly shares import information with DOC and provides DOC 
with access to both the Automated Commercial Environment and the 
Automated Commercial System. Upon request, CBP also provides entry 
documentation. When CBP shares data with DOC it is subject to the 
provisions of the Trade Secrets Act, and typically can only be released 
under Administrative Protective Order (APO). Under DOC's current 
practice, this may limit the usefulness of certain information provided 
by CBP in AD/CVD proceedings. For example, CBP may have information 
showing that a particular exporter from a country subject to an AD or 
CVD order is potentially circumventing that order through minor 
alternations of the merchandise that are performed in a third country. 
That information, however, may only be made available to DOC officials 
directly involved in the case and to parties covered under an APO in 
the proceeding. Such parties generally include counsel for foreign 
producers, importers, and the U.S. domestic industry. Because the 
information is proprietary, counsel cannot share it with their clients, 
who are not covered by an APO. This precludes the domestic industry 
from filing an anti-circumvention inquiry with DOC.
    In other situations, CBP and ICE may be prevented from sharing 
fraud and evasion information in order to protect the legal integrity 
of ongoing fraud and evasion investigations. Given that these are 
criminal investigations, it is reasonable that CBP and ICE do not share 
such information with DOC as it could become necessary for DOC to place 
the information on the proprietary case record, at which point it could 
be viewed by all parties under an APO in the proceeding.
                              new shippers
    Question. GAO has reported that new shippers represent 40 percent 
of uncollected duties, and has suggested that adjusting the 
requirements for new shipper reviews so that companies would have to 
make a minimum amount or value of exports to qualify for an individual 
AD/CVD rate. DOC agreed with this idea in a November 2010 report to the 
Congress.
    What kinds of changes in authority does DOC believe it needs in 
order to adjust the minimum amount or value of exports from companies 
requesting a new shipper review?
    Answer. DOC recommends that companies requesting new shipper 
reviews should be required to meet certain minimum volume and value 
requirements, requirements which are currently not in the statute. 
While DOC does conduct a bona fides analysis to determine whether the 
sale was in commercial quantities, the adoption of volume and value 
requirements would tighten our standards and help prevent foreign 
companies from exploiting the new shipper provision in the statue.
    What options has DOC explored to reduce the amount of time it takes 
to complete a new shipper review?
    Answer. It would be difficult for DOC to shorten the time required 
to complete a new shipper review. DOC conducts its proceedings 
according to the statute and our regulations, which provide deadlines 
for our preliminary and final determinations. Significant time is 
required for DOC to collect the necessary data, analyze this 
information and calculate a dumping margin for the final result. As 
part of our new shipper review proceedings, DOC issues questionnaires 
that often require follow-up questions, and gives parties a chance to 
comment on submissions. While DOC works in an expeditious manner with 
the resources available, the information and data required to conduct a 
new shipper review often do not allow DOC to complete its review sooner 
than the time allowed by statute.
             importance of automated commercial environment
    Question. How important and valuable to your Department's work on 
AD enforcement is development and expansion of CBP's Automated 
Commercial Environment (ACE)?
    Answer. ACE is valuable because it allows for more efficient and 
timely communication between CBP and DOC in the implementation and 
application of the AD/CVD rates. For example, ACE allows DOC to apply 
AD/CVD rates on a per-unit amount basis, in addition to the typical ad 
valorem rates. The application of a per-unit amount is important to 
counter situations where companies may understate the value of their 
imported merchandise. ACE is also much more user-friendly and flexible 
than the old automated commercial system (ACS). Moreover, there are 
nearly five times as many analysts who have been permitted ``write 
access'' to ACE than the number of analysts who had similar access to 
ACS.
                                time lag
    Question. According to a 2008 GAO report, there is a 3-year lag 
time by DOC and CBP, between the time goods arrive at the border and 
the final assessment of duties. This lag allows illegitimate importers 
to avoid paying duties by ceasing operations or claiming bankruptcy. 
GAO recommendations to improve duty collection include better 
communications between the agencies, modifying CBP's standards for 
reviewing new shippers, and assessing CBP's process for setting bond 
requirements. What steps have your agency's taken over the past 3 years 
to implement these recommendations?
    Answer. DOC and CBP worked together to design and implement the AD/
CVD module of the ACE, CBP's new trade processing system. This part of 
ACE was deployed on February 14, 2010, and has fostered improved and 
more efficient communication between the two agencies. Specifically, an 
inquiry system was built into ACE to address the issue of clarity of 
duty liquidation instructions. CBP port personnel rely on this system 
to submit questions to DOC regarding liquidation and other issues, 
enabling more accurate implementation of DOC's AD/CVD programs. Also a 
messaging system was built to track the sending and posting of DOC's 
liquidation instructions. This aspect of ACE enables quicker processing 
of liquidation instructions by CBP.
    Further, DOC's Customs Liaison Unit and members of CBP's AD/CVD 
Policy and Programs Office meet on a regular basis to discuss AD/CVD 
enforcement matters. In addition, on-going meetings are now taking 
place between senior Import Administration (IA) and Department of 
Homeland Security (DHS) officials to strengthen the dialogue on issues 
of mutual interest.
    CBP also notes that some importers no longer exist by the time CBP 
issues a bill. If we know these companies will disappear, why is there 
a delay in issuing the bill? Can this process be expedited 
administratively or does a law need to be changed?
    Answer. The delay in issuing the bill which identifies the final 
assessment amount owed on entries subject to an AD or CVD 
administrative review is due to the fact that, until DOC finishes an 
administrative review covering those entries and any subsequent 
litigation is completed, the final assessment amount is unknowable. 
Until the final assessment amount is known a bill cannot be issued. The 
law provides that after an AD or CVD order has been put in place, the 
importer must pay a cash deposit of the estimated duties.
    Therefore, at the time of entry, CBP does collect a cash deposit on 
entries at the amount of dumping or subsidization DOC determined to 
exist in the investigation or subsequent reviews. The amount of 
potentially uncollectable duties at issue here is the amount, if any, 
by which the final assessment rate exceeds that cash deposit rate 
already collected by CBP. In theory, the general import bond required 
by CBP was supposed to be the secondary source for payment of duties if 
the importer for whatever reason was not able to pay. However, 
sometimes those general bonds are insufficient. We understand that CBP 
requires single-transaction bonds for specific importers to reflect the 
risk associated with their entries of merchandise, including entries 
covered by AD/CVD proceedings.
                             side payments
    Question. The Wall Street Journal reported in February 2011, that 
some United States furniture makers have received cash payments from 
their Chinese competitors in exchange for not asking for an AD review. 
GAO similarly found that shrimp exporters made cash payments to the 
domestic U.S. industry.
    What are the agencies' view on the legality of this issue and the 
loss of revenue to the U.S. Treasury as a result of these side 
payments?
    Answer. The alleged cash payments at issue have been described by 
various parties in terms ranging from ``negotiated settlements'' to 
``extortion'' and the legality of any such arrangement has not been 
formally determined by the courts. The Department neither encourages 
nor condones such agreements, but neither do we have any authority to 
regulate or prohibit them. The trade remedy laws prescribe specific 
relief to domestic industries that are injured by unfairly traded 
foreign imports in the form of duties that are imposed on imported 
merchandise. The Government has sole authority to provide such relief 
to harmed U.S. industries and we do so exclusively based on information 
and grounds which the law permits us to consider. We cannot 
categorically state that every agreement results in a reduction of 
revenue to the Treasury because an AD review so avoided may not have 
resulted in an increase in AD duties due.
                          deemed liquidations
    Question. Untimely action by DOC and CBP can impede CBP's ability 
to process the appropriate amount of AD/CVDs within the required 6-
month period. When entries are not liquidated within the specified 
timeframe, CBP is unable to collect any supplemental duties that might 
have been owed because of an increase in the AD/CVD rate.
    What is the amount of lost revenue due to deemed liquidations?
    Answer. GAO's Report to Congress on Antidumping and Countervailing 
Duties, (GAO-08-391) (March 2008) identified more than 37,000 entries 
(1.19 percent) out of a total of approximately 3.1 million entries 
subject to AD duties liquidated from October 2004 through June 2007 
that were deemed liquidated. Of those 37,000 entries, the GAO 
identified 507 entries (1.37 percent) which should have resulted in the 
collection of additional duties, amounting to $106,000 in lost revenue.
    What steps are CBP and DOC taking to reduce the amount of 
uncollected duties attributable to deemed liquidation?
    Answer. As cited in the GAO's 2008 Report to Congress, IA 
established internal performance metrics on the timely issuance of 
liquidation instructions, defined as being no later than 15 days after 
the publication of the pertinent Federal Register notice. IA's Customs 
Unit regularly works to clarify instructions where necessary for 
processing by CBP and, on a daily basis, addresses inquiries on 
liquidation issues raised by CBP.
                  faster reaction to industry protests
    Question. The June 2010, AD enforcement report indicated that CBP 
and DOC were working on plans to increase AD collections. One area both 
agencies agreed to review and update was how you can quickly address 
protests by industries so that you can begin duty collection 
activities. The report indicated that DOC had increased staffing levels 
to process these protests.
    Has CBP also refocused its staffing? Have your agencies noticed an 
improvement in this process over the past year?
    Answer. I am not in a position to address questions pertaining to 
CBP staffing issues. I can note, however, that while DOC had 55 
unprocessed protests pending as of December 2010, as of November 2011, 
due to the increased cooperation and communication between DOC and CBP, 
there remain only 9 unprocessed protests now under review by DOC.
                       human capital and planning
    Question. In a readout conference, CBP stated that it has no 
information on what is likely to happen the next day--it could get a 
few dozen instructions from DOC that cover a limited number of ports 
and products, or it could get an enormous set of instructions that 
would require enormous effort to get the liquidation instructions 
completed.
    What kinds of information can you provide to CBP to better enable 
them to anticipate the workloads that are likely to affect their 
ability to perform their functions?
    Answer. DOC's Customs Liaison Unit and other IA staff will continue 
to build upon existing efforts to communicate regularly and work with 
CBP to ensure that CBP is aware of all upcoming DOC decisions that 
involve the issuance of CBP instructions. The volume of instructions 
sent to CBP will ebb and flow depending on the number of final results, 
preliminary determinations, etc. that DOC issues.
    Question. DOC allows domestic parties to access confidential 
information learned in your proceedings under a protective order. Do 
you feel these protective orders function well? What if these parties 
could also use that information with CBP, and access CBP information to 
use with DOC? Would this be helpful?
    Answer. The administrative protective orders (APO) administered by 
DOC function well. APOs encourage interested parties to provide 
thorough responses to our requests for information while at the same 
time providing adequate protection of their business proprietary 
information (BPI).
    As stated in my written testimony, DOC works in close cooperation 
with CBP and ICE to assist them in enforcing the customs laws and 
ensuring our border measures are effective. DOC regularly exchanges BPI 
with CBP. Specifically, 19 CFR 351.306(a) of DOC's regulations 
currently permits the disclosure of an interested party's BPI to an 
employee of CBP involved in conducting a fraud investigation relating 
to an AD/CVD proceeding. In turn, CBP transmits BPI to DOC on a regular 
basis in the form of CBP entry summary forms and supporting 
documentation. Pursuant to agreements governing the exchange of 
information between the two agencies, DOC treats such information 
received from CBP as business proprietary and such information is 
releasable only under APO in its proceedings. We find such exchanges of 
information to be very helpful in conducting our proceedings.
    This existing exchange of information between DOC and CBP has 
resulted in indictments, convictions and prison sentences for evaders 
of AD/CVD orders. To that end, we believe it has been effective is 
assisting in the enforcement of our unfair trade laws. For example, in 
June 2011, such cooperation resulted in a 6-year conviction for an 
individual who attempted to evade anti-dumping duties on steel wire 
hangers from China through illegal third country mislabeling and wire 
fraud. This individual was ordered to pay nearly $8 million in 
restitution and forfeiture as a result.
    The Trade Secrets Act generally governs DOC's handling of BPI and 
the trade laws permit DOC to share BPI with Customs officials 
``directly involved in conducting an investigation regarding fraud''. 
Thus, while DOC will share with Customs public information it obtains, 
DOC cannot share BPI with Customs for nonfraud purposes, such as to 
improve duty collection.
    Question. I understand that DOC is proposing to require cash 
deposits, instead of just bonds, between preliminary and final 
determinations in original investigations. This appears to be a 
positive decision. Do you see any reason we shouldn't make a similar 
change by eliminating the bonding privilege for new shipper reviews? 
What else can you do administratively to minimize abuse of the new 
shipper review process?
    Answer. Adopting minimum requirements for new shipper reviews will 
likely increase the reliability of calculated new shipper rates, making 
it less likely that the rate will be based on a single, 
unrepresentative high-priced sale.
             characteristics of a good anti-dumping system
    Question. GAO reported in 2008 on the U.S. AD system and 
recommended that DOC create a study on the possible advantages and 
disadvantages of alternative systems.
    What are some criteria the Congress should keep in mind as it 
considers ways to improve collection of AD duties?
    What progress has DOC made on such a study?
    Answer. On November 19, 2010, the Department delivered its Report 
to Congress on the Relative Advantages and Disadvantages of 
Retrospective and Prospective Antidumping (AD) and Countervailing Duty 
(CVD) Collection Systems.\1\ This detailed report was prepared in 
response to the conference report accompanying the 2010 Consolidated 
Appropriations Act.\2\
---------------------------------------------------------------------------
    \1\ The United States is the only major World Trade Organization 
member that uses a retrospective trade remedy system. Under such a 
system, duties are assessed, not at the time of entry, but rather some 
time after importation following the opportunity for interested parties 
to request an administrative review to determine the exact amount of 
duties to collect based on the level of dumping or subsidization that 
occurred during the review period. Conversely, under a prospective 
system, duties are collected at the time of entry based on previously 
calculated AD margins and CVD rates or, in some countries, previously 
determined normal values.
    \2\ The conferees requested that the report address the extent to 
which each type of system would:
      -- Likely achieve the goals of remedying injurious dumped or 
subsidized exports;
      -- Minimize uncollected duties;
      -- Reduce incentives and opportunities for importers to evade AD/
CVDs;
      -- Effectively target high-risk importers;
      -- Address the impact of retrospective rate increases on U.S. 
importers and their employees; and
      -- Create a minimal administrative burden.
---------------------------------------------------------------------------
    In preparing its report, the Department sought public comment and 
held a hearing on April 27, 2010. Those submitting comments ranged from 
large manufacturers to small family-owned businesses as well as unions, 
retailers, trade associations, and members of the trade bar. Comments 
and hearing participants were divided between proponents of both 
systems. Generally, representatives of domestic petitioning industries 
and workers favored the existing retrospective system, arguing that it 
more accurately and fully offsets foreign dumping and subsidization, 
while representatives of consuming industries, retailers and importers 
favored prospective systems because of the greater certainty of duty 
liability at the time of importation.
    The report, available at http://ia.ita.doc.gov/download/rvp/rvp-
final-report-to-congress-20101119.pdf, provides general background 
information on the retrospective and prospective systems and details 
the certain advantages and disadvantages associated with retrospect and 
prospective AD/CVD systems. The report also discusses alternative means 
of addressing the problem of uncollected duties and the steps that DOC 
and DHS are taking to increase duty collection. Although the 
administration has not taken a position on possible reforms needed in 
this area, the November report provides important input for 
understanding and evaluating this complex issue. An overview of 
possible advantages and disadvantages of prospective and retrospective 
systems is set out below.
    Retrospective system proponents argued that such systems are better 
able to remedy dumping because the full amount of dumping can be offset 
through the administrative review process. Increased dumping that 
occurs between reviews in a prospective ad valorem system cannot be 
addressed because any changes in the rate are prospective. Prospective 
system proponents argued that this situation can be addressed through 
more frequent reviews or the use of a prospective normal value system 
which encourages exporters to price at the fair value or be liable for 
additional duties if they price below that level.
    Prospective system proponents argued that the delay between 
importation and final assessment of duties results in large amounts of 
uncollected duties which would be eliminated in a prospective system. 
However, critics of a prospective system counter that the maximum 
amount collected under a prospective ad valorem system, for example, 
would be the minimum amount collected under a retrospective system. As 
noted in the November 2010 report, our examination of collection data 
found that, under such an ad valorem prospective system, an additional 
$426 million in Government revenue would have been foregone over a 4-
year period. The report goes on to note that the amount of foregone 
revenue is likely to be reduced but not necessarily eliminated in other 
types of prospective systems.
    Prospective system proponents noted that the system's immediacy and 
certainty of duty assessment not only benefit consuming industries, 
retailers and importers by eliminating the risk of substantial 
retrospective rate increases years after the good is imported, but also 
reduce incentives and opportunities for duty evasion. CBP also noted 
that the reduction in administrative burden would free up resources for 
increased enforcement efforts. However, the November 2010 report notes 
that while certain administrative burdens, particularly those on CBP, 
could be reduced under a prospective system, others might increase, 
depending on the type of system adopted. For example, as noted in the 
November 2010 report, if a prospective normal value system were 
adopted, the large number of AD orders and the complexity of some 
products could result in the issuance of thousands, if not hundreds of 
thousands, of normal values that would have to be administered by CBP.
                        effective communications
    Question. In 2008, GAO reported that there were frequent delays in 
DOC's transmission of liquidation instructions to CBP and that about 80 
percent of the time, DOC failed to send liquidation instructions within 
its self-imposed 15-day deadline.
    How have the agencies improved communication since 2008?
    Answer. Timely issuance of liquidation instructions is an element 
that is included in performance plans and monitored in the annual 
performance appraisal process. Accordingly, IA Operations issues 
liquidation instructions to CBP as soon as it can under its current 
policy and practice. IA's Customs Liaison Unit works closely with CBP 
to address liquidation questions raised by CBP.
    Question. In CBP's statement, it discusses how easy it is for an 
importer to find and collude with a producer to avoid paying dumping 
duties. It lists some of these schemes including illegal transshipment, 
undervaluation, failure to manifest, and misclassification. If a 
company--or a country--deliberately sets out to engage in these kinds 
of trade fraud, how can the U.S. Government appropriately tackle this 
issue?
    Answer. If presented with evidence of potential fraud, DOC alerts 
CBP immediately to that possibility and shares the evidence with CBP. 
If sufficient to trigger an investigation into commercial fraud, CBP 
works in conjunction with ICE and DOJ, with assistance from DOC, in 
pursuing the investigation, which, as has been noted, has resulted in a 
number of indictments, convictions, and prison sentences for evaders of 
our trade laws. For example, in June 2011, such cooperation resulted in 
a 6-year conviction for an individual who attempted to evade AD duties 
on steel wire hangers from China through illegal third-country 
mislabeling and wire fraud. This individual was ordered to pay nearly 
$8 million in restitution and forfeiture as a result.
                         product concentration
    Question. CBP reported that uncollected AD duties are highly 
concentrated among a few products (crawfish, fresh garlic, mushrooms, 
honey, and wooden bedroom furniture). These five products represent 
more than 80 percent of the uncollected duties.
    Why are uncollected AD duties concentrated among these products? 
Why don't you focus your limited resources on these products and create 
task forces as was done for textiles?
    Answer. DOC is diligent in its calculation of cash deposit and 
liquidation instructions, but CBP handles issues of duty evasion and 
fraud. We continue to work closely with CBP to share information we 
collect that relates to the above issues. We also have applied a per 
unit liquidation rate in a number of proceedings in order to counter 
situations where companies regularly understate the value of their 
imported merchandise. We note that litigation in proceedings involving 
the above cases has also delayed the collection of AD duties.
                         willful circumvention
    Question. As noted in the background section, companies willfully 
circumvent the provisions of the AD/CVD laws by illegally transshipping 
goods through an intermediate destination to mask the true country of 
origin; undervaluing goods to reduce the amount of AD/CVD owed; 
misclassifying or misdescribing merchandise outside the scope of the 
order and, therefore, not subject to AD/CVD; and failing to manifest 
(smuggling) goods. What remedies are there to pursue those who 
willfully circumvent the laws?
    Answer. The issues listed in this question concern customs fraud, 
which is within the authority of CBP, not that of DOC, and thus would 
be better addressed by CBP. However, to the extent record evidence is 
obtained by or submitted to DOC concerning such activity under the 
unfair trade laws, DOC, by statute, is permitted to and does share the 
information with CBP's customs fraud division and can take such 
information into consideration in reaching its AD/CVD determinations.
    For example, in an AD or CVD proceeding, if DOC found that a party 
withheld or did not disclose necessary information during its 
proceeding, DOC has authority to reject the respondent's submitted data 
and select and apply an inference that is adverse to that party in 
determining the appropriate duty rate.
    Question. Can the U.S. Government issue, in essence, a ``stop 
importing'' order against the company or the individual? Recognizing it 
is difficult to collect revenues and conduct inspections overseas, what 
can we do to the U.S.-based representatives of these illegal importers?
    Answer. DOC is responsible for administering the AD/CVD laws. The 
duty rates determined by DOC in its AD/CVD proceedings form the basis 
of its instructions to CBP to impose cash deposits and collect duties 
from U.S. importers. While DOC is charged with administering the AD/CVD 
laws, only CBP is charged with overseeing importer status and behavior.
                                 ______
                                 
              Questions Submitted by Senator Daniel Coats
           anti-dumping and countervailing duties enforcement
    Question. What steps are CBP, ICE, and DOC taking to improve 
communication about AD/CVD enforcement efforts with private industry?
    Answer. DOC frequently meets with domestic parties who wish to 
discuss AD/CVD enforcement issues. If it is determined the issue in 
question may be addressable under the provisions of section 781 of the 
Tariff Act of 1930 for which DOC is responsible, we may initiate a 
circumvention investigation. However, if it involves an issue such as 
transshipment, we will refer the outside party to CBP insofar as that 
typically indicates an infraction of customs law. In these instances, 
we will provide the outside party the name of the appropriate office 
and official at CBP to contact. Occasionally, we will coordinate the 
scheduling of a meeting between the outside party and CBP and, 
typically, a member of the Import Administration Customs Unit will 
participate in the meeting. If CBP or ICE initiates an investigation, 
we will frequently request updates on the progress of the 
investigation. However, CBP and/or ICE cannot always provide us with an 
update because the ongoing investigation may be confidential or the 
release of information may be restricted by law.
    Question. What is the state of information sharing between CBP, 
ICE, and DOC? Are there barriers to sharing information that each 
agency obtains during AD/CVD investigations and verifications? As an 
example, does CBP have information about shippers that would be useful 
to DOC?
    Answer. DOC, CBP, and ICE maintain strong working relationships and 
routinely share information to the extent allowed under current laws. 
When DOC uncovers information that indicates possible evasion of the 
AD/CVD laws, the information is provided to CBP pursuant to 19 U.S.C. 
1677f(b)(1)(a)(ii) which states ``Commerce may provide information 
received in the context of an investigation or administrative 
proceeding to CBP, to assist the Department of Homeland Security with 
an investigation into fraud and evasion.'' Under this same provision, 
DOC makes available to CBP and/or ICE information in support of those 
agencies' investigations into possible fraudulent activities by 
importers of merchandise subject to AD/CVD orders.
    For its part, CBP maintains information about exporters, 
manufacturers, importers, etc., that is critical to DOC's conduct of 
AD/CVD proceedings, including the conduct of new shipper reviews. CBP 
regularly shares this information with DOC. Such information is subject 
to the provisions of the Trade Secrets Act, and typically can only be 
released under Administrative Protective Order (APO). This may limit 
the usefulness of the information under current DOC practice. For 
example, CBP may have information showing that a particular exporter 
from a country subject to an AD or CVD order is potentially 
circumventing that order through minor alternations of the merchandise 
that are performed in a third country. That information, however, may 
only be made available to DOC officials directly involved in the case 
and to parties covered under an APO in the proceeding. This impedes 
DOC's ability to initiate a formal anti-circumvention inquiry into the 
exporter's activities.
          length of time devoted to reviews and investigations
    Question. Each witness has testified on the length of time it takes 
to do reviews or investigations involving trade enforcement, 
specifically AD/CVDs. In prepared testimony, Deputy Assistant Secretary 
Lorentzen mentions the October 2006 final affirmative determination of 
circumvention of the AD order on petroleum wax candles from China--but 
the complaint alleging possible circumvention was filed in 2004; and 
Deputy Assistant Director Ballman speaks to the case alleging 
transshipment of Chinese honey which began in February 2008 and has 
resulted in fines and prison sentences--but the most significant 
indictments did not come for 2.5 years--until September 2010. What can 
be done to shorten these timeframes so that enforcement has a deterrent 
effect on others across the trade community?
    Answer. DOC, in administering the AD/CVD laws, conducts scope 
inquiries, including four specific types of statutory anti-
circumvention inquiries for:
  --merchandise assembled in third countries;
  --merchandise assembled in the United States;
  --later developed products; and
  --products altered in some minor fashion.
DOC is very aware of the potential impact the results of one of these 
inquires may have and strives to complete all such inquiries within the 
timelines established for these proceedings. However, occasionally (in 
some rare or unusual cases), due to the complexity of the issues or in 
order to most efficiently utilize available resources, the final 
results of a scope or anti-circumvention inquiry may be delayed.
    DOC plays no role in the setting of deadlines for customs fraud 
cases such as the case involving the transshipment of Chinese honey.
                    uncollected anti-dumping duties
    Question. GAO mentioned in testimony the more than $1 billion in AD 
duties that have not been collected. These duties are related primarily 
to just five products--honey, fresh garlic, preserved mushrooms, 
crawfish, and bedroom furniture from China. What can be done at this 
point to collect these duties, some of which I believe stretch back to 
2004? Some of these collections would go back to the U.S. Treasury to 
finance the Government--some would actually go back to these industries 
that have been damaged under the ``Byrd amendment''. I realize that 
U.S. Customs and Border Protection has a process it follows for debt 
collection--which on average can take 300 days before even referring 
the case to attorneys--but if some of these duties were imposed in 
2004, that would be 7 years ago which is a considerable length of time 
beyond 300 days. What exactly is the central issue preventing either 
collection or the liquidation of any bonds posted by the importers? 
Please give us more transparency into whether these amounts are 
collectible; what is the process; and what is the plan at DOC and CBP 
to resolve this situation.
    Answer. Part of the explanation is the manner in which the AD/CVD 
laws generally operate. For example, a retrospective duty collection 
system, such as that provided for under U.S. law, allows imports to 
enter the United States at a cash deposit rate, and then at a later 
date, after an administrative review proceeding, the final duty 
assessment is determined and imposed on the entry. At the time of 
entry, an importer must submit an estimated cash deposit rate based on 
a prior DOC determination. However, neither the importer nor the U.S. 
Government knows the exact amount of the final assessment that will be 
due for that entry until DOC has completed its administrative review. 
Given the importance of thorough investigation and the delays in 
assessment that litigation may introduce to assure due process, DOC may 
not be able to issue a final decision for some time, from 18 to 30 
months. Therefore, it is difficult to determine the amount of bonding 
to require upon entry of the import. In the time between the entry date 
and final assessment date, the importer may file for bankruptcy or 
simply disappear. CBP must then resort to trying to collect from the 
surety that issued a general import bond or a special AD or CVD bond. 
Because the final duty assessment was not known at the time of entry, 
these bonds may not cover the total amount of the duty to be collected, 
resulting in cases of under-collection.
    Some suggest the problem could be resolved with the adoption of a 
prospective system, which other countries employ. A prospective system, 
however, could present a different set of questions and challenges. In 
a prospective system the final duties are assessed upon entry at the 
estimated cash deposit rate calculated in the original investigation or 
a subsequent review. In such systems, the governments do not impose 
duties based on the actual margin of dumping calculated for the entry 
in question; instead, they merely apply the duty rates calculated for 
prior entries to future entries. As a result, in a prospective system, 
while there is little question that the actual amount of duty owed will 
be paid, there is no certainty that the amount of duty owed equals the 
extent of dumping occurring.
    Question. What suggestions do CBP and DOC have to get China to 
focus on solving this problem?
    Answer. We engage China regularly on trade remedy issues in various 
forums, such as in the Trade Remedies Working Group of the United 
States-China Joint Commission on Commerce and Trade, as well as in the 
context of informal bilateral exchanges and meetings. We will continue 
to engage China on areas of concern regarding our respective AD/CVD 
regimes, including with respect to systemic issues of evasion and 
uncollected duties.
    Question. Last August, DOC announced 14 proposals to strengthen the 
administration of the Nation's AD/CVDs laws that could be accomplished 
through administrative and regulatory changes. Among the proposals were 
strengthening the certification process for submission of information 
and adoption of a new methodology for valuing wage rates in nonmarket 
economies. What is the status of implementation of these proposed 
changes? How do these proposed changes relate to DOC's enforcement 
mission?
    Answer. We issued a Federal Register notice on February 18, 2011, 
inviting public comment on the issue of wage rates. After reviewing all 
of these comments, the Department decided to use a wage rate source 
which is inclusive of all labor costs, and changed our methodology to 
use labor costs from a single surrogate country. The Federal Register 
announcing this change in practice was published on June 20, 2011.
    With regard to the certification process, on February 10, 2011, in 
an interim rule (Interim Final Rule), the Department amended its 
regulations to strengthen the certifications that accompany the 
submission of factual information in AD/CVD proceedings. The Department 
revised the text of both the certification for company or Government 
officials, as well as the certification for legal counsel or other 
representatives. On March 14, 2011, the Interim Final Rule became 
effective for all segments of all proceedings initiated on or after 
that date. As such, all submissions containing factual information were 
required to include the revised certifications.
    In response to the Department's request for comments on the Interim 
Final Rule, some commenters discussed the appropriateness of requiring 
foreign governments and their officials to submit a certification that 
one commenter claims includes an acknowledgement that the certifying 
individual may be subject to criminal sanctions under U.S. law. Some 
parties contend that it is inappropriate for the Department to impose a 
certification requirement that, these parties claim, subjects foreign 
governments to potential liability from which they are immune, absent 
limited exceptions, pursuant to U.S. statutory law (e.g., the Foreign 
Sovereign Immunities Act) and common law. In addition, the new 
certification requirements include language which certain parties claim 
impose additional enforceable legal obligations on foreign governments, 
such as the notation that the Department may preserve the submission 
for purposes of determining the accuracy of a certification, even if a 
party otherwise withdraws the submission from the record, and also the 
language indicating that the submitter must maintain the original of 
the certification for a 5-year period. These parties contend that the 
purported additional legal obligations which this language imposes are 
also contrary to principles of sovereign immunity.
    In order for the Department to consider those comments fully and 
not to impede the progress of ongoing AD/CVD proceedings, which are 
conducted under strict statutory deadlines, on September 2, 2011, the 
Department issued the Supplemental Interim Final Rule which permits 
foreign governments to file certifications in either the format that 
was in use prior to the effective date of the Interim Final Rule or in 
the format provided in the Interim Final Rule. The Department also 
allowed interested parties to submit comments on the Supplemental 
Interim Final Rule, and the comment period closed on October 3, 2011.
    The Supplemental Interim Final Rule is effective as of September 2, 
2011, and will remain in effect until such time as a final rule is 
promulgated. This Supplemental Interim Final Rule only affects the 
certifications required by foreign governments and does not affect the 
certifications that other interested parties (i.e., company officials 
and legal representatives) must file. As such, all other aspects of the 
Interim Final Rule remain in effect and fully apply to all company 
officials and representatives.
    The Department intends to publish a final rule within 1 year from 
the publication of the Supplemental Interim Final Rule. This time 
period is necessary in order to consider fully all aspects of the rule 
as well as to address all of the comments received, not only the 
comments submitted in response to the Supplemental Interim Final Rule, 
but also all of the comments received in response to our request for 
comments on the Interim Final Rule published last February.
    Question. As DOC continues to investigate allegations of 
circumvention--and these allegations often involve China--has DOC 
developed any ideas as to what more could be done to prevent these 
companies from circumventing and evading our trade laws? Please 
summarize the suggestions made.
    Answer. DOC, CBP, and ICE are the agencies primarily responsible 
for AD/CVD enforcement. DOC conducts the initial investigations and 
subsequent reviews to determine the actual amount of AD/CVDs to be 
assessed and also investigates circumvention inquiries. CBP collects 
AD/CVDs on imports of goods based on the instructions of DOC, pursues 
those parties that evade the payment of AD/CVDs, and imposes penalties 
through CBP's civil authorities. CBP also refers potential criminal 
violations of AD/CVD laws to ICE, which investigates such violations 
and works together with the Department of Justice (DOJ) to prosecute 
the responsible parties.
    DOC takes these matters seriously and will more aggressively work 
in close cooperation with CBP, ICE, and DOJ to share information and 
assist in each others' investigations, and persist in the continued 
improvement of our methodology and communications.
    Question. There are many private and public programs that provide 
new applicants extensive materials before allowing individuals or 
companies to participate. Often the information may include the 
potential penalties for violation of the rules of the program. When a 
company applies for a new shipper rate with DOC what process does the 
company go through? Is there an opportunity to educate these new 
shippers on the penalties for violating our laws and on what 
constitutes circumvention and why it is a violation of law?
    Answer. DOC's regulations at 19 CFR 351.214 set forth in detail the 
requirements that must be met by exporters requesting new shipper 
reviews. These requirements include various types of documentation 
supporting their request, as well as explicit certifications that the 
requester meets the statutory requirements for being considered a new 
shipper. The requester must submit documentation that establishes the 
date of the sale and/or the date it was imported into the United 
States. In addition, the documentation must show the volume of the 
first shipment and any subsequent shipments, as well as the date of the 
first sale to an unaffiliated party. The requester must certify that it 
was not affiliated with any company that shipped during the 
investigation and if the requesting exporter is not the producer of the 
merchandise, the producer must provide the same certification. If the 
exporter or producer is in an NME country, it must certify that it is 
not under the control of the central government.
    In addition to the documentation and new shipper-specific 
certifications, the requesting exporter and its counsel must file with 
the request a certification attesting to the accuracy and completeness 
of the information contained in the request. On February 10, 2011, DOC 
published an interim final regulation (Interim Final Rule) enhancing 
the certification requirements for all submissions filed in any AD or 
CVD proceeding, including requests for new shipper reviews. Although 
parties who knowingly and willingly submitted false statements to DOC 
were always subject to possible criminal sanctions, these enhanced 
certifications now include an explicit acknowledgement that U.S. law 
(including, but not limited to, 18 U.S.C. 1001) imposes criminal 
sanctions on individuals who knowingly and willfully make material 
false statements to the U.S. Government.
    In order for the Department to consider comments regarding foreign 
sovereign immunity that it received in response to the Interim Final 
Rule, and not to impede the progress of ongoing AD/CVD proceedings, 
which are conducted under strict statutory deadlines, on September 2, 
2011, the Department issued the Supplemental Interim Final Rule. The 
Supplemental Interim Final Rule permits foreign governments to file 
certifications in either the format that was in use prior to the 
effective date of the Interim Final Rule or in the format provided in 
the Interim Final Rule. This Supplemental Interim Final Rule only 
affects the certifications required by foreign governments and does not 
affect the certifications that other interested parties (i.e., company 
officials and legal representatives) must file. As such, all other 
aspects of the Interim Final Rule remain in effect and fully apply to 
all company officials and representatives.
    DOC has posted on its Web site a checklist detailing the 
requirements for requesting a new shipper review. As such, companies 
can review the checklist to determine if they meet the requirements. In 
addition, during the course of new shipper reviews, DOC conducts an 
exhaustive investigation into the bona fides of the new shipper sale 
and the new shipper itself, and only if we determine that the new 
shipper sale was a legitimate commercial transaction and the new 
shipper is a bona fide business do we calculate an individual dumping 
margin for the company.
                                 ______
                                 
                   Questions Submitted to Eddy Hayes
            Questions Submitted by Senator Mary L. Landrieu
                   importance of anti-dumping duties
    Question. Would the American shrimp industry survive without anti-
dumping (AD) duties in place to combat unfair foreign trade practices? 
Please provide an overview of why the U.S. trade remedy laws are 
important to the U.S. shrimp and other industries.
    You noted that the gulf shrimp and crawfish have been hit hard with 
unpaid duties--43 percent of all unpaid duties since 2001 are in 
seafood, primarily those two industries. Why have these critical gulf 
seafood industries been hit so hard with unpaid duties?
    Answer. The American shrimp industry would not survive without AD 
duties on unfairly traded shrimp imports. Nearly 90 percent of the 
shrimp consumed in the United States is imported. The small market 
share of domestic producers makes them particularly susceptible to 
unfair trade practices. In addition, the U.S. shrimp industry is a 
wild-catch industry, which in our industry's view ensures a higher-
quality product than that of foreign producers' farmed shrimp. This 
fact also means that processors must sell from inventory for that part 
of the year when the shrimp fishery is out of season. This makes 
processors very vulnerable to price undercutting in the off-season, 
when they have already paid for their inventory and must compete for 
customers on the basis of price.
    In the early 2000s, a surge of imports at dumped prices drove the 
industry to the brink of collapse. The domestic industry was forced to 
follow the downward spiral in prices, depriving processors of the 
ability to offer dockside prices that could sustain shrimp fishermen. 
When fishermen could not receive prices for their shrimp that would 
cover their costs of fuel and boat maintenance, many of them were 
forced to tie up their boats rather than catch shrimp. The industry was 
only able to survive because of the AD duties they obtained on shrimp 
from six countries. The duties put a floor on prices, moderated import 
volumes, and stabilized the market for domestic producers.
    The shrimp industry is typical of many American industries that 
need trade relief to remedy distortions caused by unfair trade 
practices. Effective enforcement of the domestic trade remedy laws 
ensures that firms and workers can compete on a level playing field on 
the basis of their productivity, innovation, and efficiency, rather 
than their willingness to resort to injurious dumping or subsidies. In 
order for these remedies to fulfill their intended purpose, however, it 
is essential that orders be enforced and that AD and countervailing 
duties (CVDs) be fully collected. Otherwise, the Government is not only 
deprived of revenue, but the market disciplining effects of the orders 
are corroded, the integrity of the system is compromised, and 
industries suffer continued injury even with orders in place.
    The shrimp and crawfish industries have borne the brunt of 
uncollected duties, at least according to public data on the rate of 
undercollection published by Customs. Overall, orders on agricultural 
and aquacultured products have been most vulnerable to duty 
undercollection. One of the reasons is that such sectors of the economy 
tend to be more fragmented than manufacturing industries such as steel. 
Foreign producers and importers in these industries appear and 
disappear and with much more frequency, making it much harder to track 
which firms are legitimate producers, who the producer/exporter is in 
fact on imports entering the United States (making collection of the 
correct cash deposits more difficult), preventing gaming of the system 
through surges in imports allegedly from an exporter with a low-cash 
deposit rate which are later found to be dumped at much higher rates, 
and the inability to collect moneys owed from importers (partially 
attributable to the fact that exporters, through an agent, can be an 
importer without any physical presence in the United States) if they 
are thinly capitalized.
                         require cash deposits
    Question. You suggest U.S. Customs and Border Protection (CBP) 
eliminate the posting of bonds for new shippers and require cash 
deposits instead.
    Do you know if CBP can make this change administratively or does it 
require a change in law? Would this have a negative impact on other 
U.S. companies?
    Answer. The statute gives CBP the option of allowing new shippers 
to post bonds rather than cash deposits during the pendency of a new 
shipper review. The privilege has become the standard practice, with 
all new shippers enjoying the ability to import under bonds while a 
review is pending. While it may technically be permissible for CBP to 
not allow new shippers to take advantage of the bonding privilege, a 
legislative solution that eliminates the privilege will be much easier 
to administer with more legal certainty. Indeed, the Congress did once 
suspend the bonding privilege before on a temporary basis from August 
2006 to July 2009 as part of legislation, the Pension Protection Act 
which passed the Congress in 2006. The privilege can just as easily be 
revoked permanently with a similar legislative change.
    The change would not have a negative impact on legitimate 
importers, as they will be entitled to a return of any overpaid cash 
deposits, with interest, if their final duty liability determined at 
the end of a review is less than the cash deposit amount. The major 
impact of the change would be to provide better security for Government 
revenue that is owed and ensure that new shipper reviews are not abused 
to bring in dumped product but evade duty liability.
    Question. You speak of CBP being unable or unwilling to share (or 
use) information provided by shippers for security purposes also to use 
it for trade enforcement.
    Do you know why this information wall exists? Has this been raised 
with CBP?
    Answer. CBP is prohibited by law from saving much of the shipping 
and container information that it collects from importers as part of 
the enhanced ``10+2'' system for security purposes for trade 
enforcement purposes. The information wall was imposed as part of the 
legislation that created the new ``10+2'' requirements, reportedly at 
the request of the import community. We believe that CBP would like to 
access this information for trade enforcement purposes, as it would be 
helpful in identifying circumvention, transshipment, and other evasion 
schemes. A legislative change would be required to remove the 
information wall and permit CBP to use this information for trade 
enforcement.

                         CONCLUSION OF HEARING

    Senator Landrieu. Okay? All right. The subcommittee is 
recessed.
    [Whereupon, at 11:54 a.m., Wednesday, May 25, the hearing 
was concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]

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