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74–204—PDF 2011

S. HRG. 112–406 

ENFORCING AMERICA’S TRADE LAWS IN THE 

FACE OF CUSTOMS FRAUD AND DUTY EVASION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INTERNATIONAL TRADE, 

CUSTOMS, AND GLOBAL COMPETITIVENESS 

OF THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 5, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

SUBCOMMITTEE ON INTERNATIONAL TRADE, CUSTOMS, AND GLOBAL COMPETITIVENESS

RON WYDEN, Oregon, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

JOHN THUNE, South Dakota 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Subcommittee 

on International Trade, Customs, and Global Competitiveness, Committee 

on Finance ............................................................................................................ 1 

Thune, Hon. John, a U.S. Senator from South Dakota ........................................ 3 

CONGRESSIONAL WITNESSES 

Brown, Hon. Sherrod, a U.S. Senator from Ohio .................................................. 5 

McCaskill, Hon. Claire, a U.S. Senator from Missouri ......................................... 7 

Blunt, Hon. Roy, a U.S. Senator from Missouri .................................................... 9 

PUBLIC WITNESSES 

Mahoney, Robert L., president, Tubular Products Group, Northwest Pipe 

Company, Portland, OR ....................................................................................... 12 

Adee, Richard, owner, Adee Honey Farms, and chairman, American Honey 

Producers Associate Legislative Committee, Bruce, SD ................................... 14 

Schagrin, Roger, chairman, Government Affairs Committee, Committee to 

Support U.S. Trade Laws, Annapolis, MD ......................................................... 16 

Glassman, Karl, executive vice president and chief operating officer, Leggett 

and Platt, Incorporated, Carthage, MO ............................................................. 18 

Trossevin, Marguerite E., Jochum, Shore, and Trossevin, on behalf of the 

Retail Industry Leaders Association, Alexandria, VA ...................................... 19 

GOVERNMENT WITNESSES 

Gina, Allen, Assistant Commissioner of International Trade, Customs and 

Border Protection, Washington, DC ................................................................... 31 

Ballman, J. Scott, Deputy Assistant Director, Homeland Security Investigations, Immigration and Customs Enforcement, Department of Homeland 

Security, Washington, DC ................................................................................... 32 

Lorentzen, Ronald, Deputy Assistant Secretary for Import Administration, 

Department of Commerce, Washington, DC ...................................................... 35 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Adee, Richard: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 51 

Ballman, J. Scott: 

Testimony .......................................................................................................... 32 

Prepared statement .......................................................................................... 62 

Blunt, Hon. Roy: 

Testimony .......................................................................................................... 9 

Brown, Hon. Sherrod: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 69 

Gina, Allen: 

Testimony .......................................................................................................... 31 

Prepared statement .......................................................................................... 71 

Glassman, Karl: 

Testimony .......................................................................................................... 18 

Prepared statement .......................................................................................... 76 

Page

IV 

Lorentzen, Ronald: 

Testimony .......................................................................................................... 35 

Prepared statement .......................................................................................... 82 

Mahoney, Robert L.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 87 

McCaskill, Hon. Claire: 

Testimony .......................................................................................................... 7 

Rockefeller, Hon. John D., IV: 

Prepared statement .......................................................................................... 89 

Schagrin, Roger: 

Testimony .......................................................................................................... 16 

Prepared statement .......................................................................................... 90 

Snowe, Hon. Olympia J.: 

Prepared statement .......................................................................................... 98 

Thune, Hon. John: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 100 

Trossevin, Marguerite E.: 

Testimony .......................................................................................................... 19 

Prepared statement .......................................................................................... 102 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 105 

‘‘Duty Evasion: Harming U.S. Industry and American Workers,’’ staff 

report dated November 8, 2010 ................................................................... 107 

Prepared statement of Hon. Rob Portman, with attachment ....................... 186 

COMMUNICATIONS

Agri-Fab, Inc. ........................................................................................................... 195 

Coalition to Enforce Antidumping and Countervailing Duty Orders .................. 198 

GEO Specialty Chemicals, Inc. ............................................................................... 201 

JMC Steel Group ..................................................................................................... 204 

National Council of Textile Organizations (NCTO) .............................................. 207 

The National Treasury Employees Union (NTEU) ............................................... 217 

Seaman Paper Company of Massachusetts, Inc. ................................................... 229 

Southern Shrimp Alliance ....................................................................................... 233 

(1) 

ENFORCING AMERICA’S TRADE LAWS 

IN THE FACE OF CUSTOMS FRAUD 

AND DUTY EVASION 

THURSDAY, MAY 5, 2011 

U.S. SENATE,

SUBCOMMITTEE ON INTERNATIONAL TRADE, 

CUSTOMS, AND GLOBAL COMPETITIVENESS, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 2:07 p.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Ron Wyden 

(chairman of the subcommittee) presiding. 

Present: Senators Rockefeller and Thune. 

Also present: Democratic staff: Jayme White, Staff Director; Republican staff: Paul Poteet, Staff Director. 

OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR 

FROM OREGON, CHAIRMAN, SUBCOMMITTEE ON INTERNATIONAL TRADE, CUSTOMS, AND GLOBAL COMPETITIVENESS, COMMITTEE ON FINANCE 

Senator WYDEN. The committee will come to order. 

As the Senate Subcommittee on International Trade, Customs, 

and Global Competitiveness, it is our job to promote trade laws and 

policies that give our businesses and our workers the best opportunity to compete globally. It is also this subcommittee’s job to ensure that those laws and policies are being properly implemented 

and enforced. 

For almost a century, Democratic and Republican administrations have promoted and protected America’s antidumping and 

countervailing duty laws. These laws recognize the reality that foreign competitors do not always play by the rules. Some employ unfair and unscrupulous trade practices that put our businesses at a 

serious disadvantage. 

So, when it comes to ensuring that American businesses and 

workers have a level playing field to compete, antidumping laws 

and countervailing duty statutes are our first line of defense. But 

it is not just enough to pass laws. They have to be enforced. Duties 

are not going to work unless they are actually assessed and collected. 

Today we are going to hear from Senators of both political parties and companies from across the land that the antidumping and 

countervailing duties that protect our businesses and our workers 

2 

from grievous economic harm are being evaded, they are being 

flouted by foreign suppliers and dishonest importers. 

For more than a year, this subcommittee has engaged with industry workers and relevant government agencies to determine the 

magnitude and scope of the problem of the evasion of the antidumping and countervailing duty orders and how the executive 

branch responds to those issues. 

In one effort, staff created a fictitious import company called 

AvisOne Traders, Inc. With little more than a Gmail account, staff 

were able to identify numerous Chinese suppliers so brazen in 

their willingness to avoid U.S. antidumping laws that they sent 

e-mails detailing how they would falsify documents or transship 

products through third-party countries in order to get around our 

U.S. laws. 

Many of these suppliers actually post online advertisements 

boasting of their ability to help U.S. importers avoid paying antidumping duties. All of this is taking place under the very sleepy 

eyes of the U.S. Customs and Border Protection Agency. 

Our staff also learned that it often takes this agency nearly a 

year to ask its sister agencies for investigatory help when it is 

needed, and, when the agency does refer a case to an outside agency, they often do not follow up to ensure that it actually gets handled. It generally takes years for the government to conclude an investigation into evasion and reassess the appropriate duties that 

should have been collected. 

Of course, while the agencies are dragging their feet to enforce 

our trade laws, this country’s domestic manufacturers get hammered—hammered—by foreign trade cheats. It is not like the 

cheaters are waiting around to get caught and pay their fines. With 

our government dawdling, they can disappear long before the socalled government watchdogs arrive. 

Now, there are two principal American government agencies that 

are supposed to be the cops on this beat. In my view, one of them, 

the Customs and Border Protection Agency, treats allegations of 

duty evasion like junk mail. The other, Immigration and Customs 

Enforcement, has been more visible on the issue of alleged illegal 

movie downloads than taking steps to protect tens of thousands of 

manufacturing jobs that are threatened by unfair practices. 

Today, the witnesses are going to describe the relief they won 

from unfair trade practices and how that relief was undermined by 

duty evasion and a disinterested and disengaged government. They 

are going to describe what pretty much amounts to bureaucratic 

water torture. 

These firms start getting clobbered by dumped imports, so they 

prove to the International Trade Commission that they are being 

harmed, and they prove to the Department of Commerce that 

dumping is occurring. They do all this to finally get some relief 

from the unfair imports, only to find that it is essentially meaningless because the same corrupt suppliers are driving what amounts 

to a Mack truck through the enforcement loopholes of our Federal 

Government. 

Last year, I was pleased to join with Senator Snowe to introduce 

the ENFORCE Act that would discipline the government to quickly 

3 

begin and conclude investigations into evasions of the antidumping 

and countervailing duty orders. 

As many in this room are aware, many of my colleagues and I 

are working to build off of and improve that proposal so that it effectively helps to combat and deter evasion and circumvention of 

the antidumping and countervailing duties without frustrating legitimate trade. We are shortly going to be in a position to move a 

bill through the Senate and get it to the President’s desk for a signature. This is a critical issue to address. 

This administration needs to credibly assure the Congress that 

it is doing all it can to enforce the trade laws at a time when the 

President is asking the Congress to consider the merits of three 

free trade agreements and Russia’s accession to the World Trade 

Organization. That is not going to happen if the view is that the 

Chinese and other suppliers are going to launder their merchandise 

through our free trade partners to avoid duties, particularly those 

in place to remedy dumping and government subsidies. 

I am very pleased to have so many colleagues here today, and I 

want to recognize all of them beginning with a new member of the 

Senate Finance Committee, our new ranking member on this subcommittee. Senator Thune and I have teamed up on a whole host 

of economic issues over the years and are already moving forward 

with a Digital Goods bill. Senator Thune, it is going to be great to 

work with you here, and I welcome whatever remarks you would 

like to make. I will then turn to Senator Rockefeller—Chairman 

Rockefeller—and then we have three of our colleagues. 

So, Senator Thune, for whatever remarks you would like to 

make. 

[The prepared statement of Senator Wyden appears in the appendix.] 

OPENING STATEMENT OF HON. JOHN THUNE, 

A U.S. SENATOR FROM SOUTH DAKOTA 

Senator THUNE. Thank you, Mr. Chairman. I do appreciate your 

leadership on this and many other issues, and I have really enjoyed 

working with you and look forward to the things that we can do 

in the area of trade on this committee. Thank you for holding this 

important hearing today. I want to thank all of our witnesses for 

taking the time to testify today. 

It is unfortunate that trade can sometimes become a divisive 

issue. We have certainly seen that in the past. However, I believe 

we should all be able to agree on the principle that U.S. trade laws 

should be enforced as effectively as possible, regardless of how we 

view broader trade issues. Today’s hearing is an opportunity to examine our antidumping and countervailing duty laws, an area 

where many U.S. producers, shippers, and importers believe that 

the law is not being enforced as well as it should be. 

In my State of South Dakota, for example, we have seen firsthand the impact of our inability to fully enforce the existing antidumping duty on Chinese honey. While imports of dumped Chinese 

honey initially declined after the antidumping order was put in 

place, unscrupulous Chinese producers have since found ways 

around the antidumping duties. These producers have increasingly 

transshipped their honey through third countries, such as Malaysia 

4 

and Indonesia. We have also seen Chinese honey mislabeled as 

honey blends, so as to avoid the antidumping duties. 

Unfortunately for U.S. producers, honey is only one example of 

the problem. I know that Chairman Wyden and a number of other 

Senators are concerned about steel products evading antidumping 

duties. In my State of South Dakota, furniture producers have been 

harmed by circumvention of existing antidumping duties on Chinese bedroom furniture. I believe we must do more to enforce the 

laws on the books so as to stop the flow of dumped products, and 

I look forward to the opportunity to discuss these issues today in 

greater detail. 

At the same time, we strive to make enforcement of our trade 

laws more robust. We also must be mindful of the burdens that are 

often placed on the vast majority of U.S. importers who are not engaged in any fraudulent activity. We need to remember that we 

live in an increasingly global economy and that any new burdens 

on the flow of goods across our borders, even if well-intentioned, 

can harm our economy and drive commerce and trade to other nations. 

America’s retailers in particular are large importers and have 

much at stake in this debate. They have voiced concerns in the 

past about certain proposed changes to our antidumping and countervailing duty laws and have suggested new approaches, such as 

moving from the current retrospective system to a prospective system, more in line with our trading partners. 

I am pleased that we are going to hear the perspective of America’s retailers today as well. Enforcement of our trade remedy laws 

is important for another reason: to generate and maintain public 

support for international trade. 

While I believe the factual case behind our three pending trade 

agreements is very compelling—and I was pleased to see the administration yesterday finally commit to moving all three—it is not 

enough to quote dry numbers and statistics if we want to rebuild 

public support for trade. 

We must also convince Americans that the global trading system 

is fundamentally fair. We need Americans to know that, while our 

businesses play by the rules, they should expect foreign businesses 

to do the same. When foreign producers evade our laws and harm 

U.S. producers, confidence in global trade is undermined here at 

home. 

As Congress considers the Colombia, Panama, and South Korea 

free trade agreements in the coming weeks and months, broadbased public support for trade will be even more important. I hope 

that the discussion today will inform our debate and generate new 

ideas and approaches to ensure that America’s trade laws are enforced in a manner that is fair to producers and to importers, encourages the movement of legitimate trade, and broadens support 

for the upcoming trade agreements. 

Mr. Chairman, I thank you again for holding this hearing today 

and look forward to hearing from our witnesses. 

Senator WYDEN. Senator Thune, thank you. 

[The prepared statement of Senator Thune appears in the appendix.] 

5 

Senator WYDEN. I think this will be the first of a whole host of 

issues we tackle in a bipartisan way, and I am glad you are here. 

Demonstrating the importance of this issue, we are joined by 

Chairman Rockefeller. Mr. Chairman, did you want to put a statement in the record or make some remarks, or whatever is your 

pleasure? 

Senator ROCKEFELLER. I will do what you suggested. I am flabbergasted by ‘‘honey’’ going to ‘‘honey blend,’’ and then all of a sudden they can get around our trade rules. I mean, that is what we 

are here about, and the enforcement part. Thank you, Mr. Chairman. 

[The prepared statement of Senator Rockefeller appears in the 

appendix.] 

Senator WYDEN. Thank you, Mr. Chairman. 

We have three colleagues here today, all of whom have spent a 

lot of time on these issues. Let me just give a brief introduction. 

Senator Brown and I serve on the President’s Export Council. He 

has long been a champion of working-class folks, particularly on 

this trade issue. Senator Brown, we are very glad you are here. 

Senator McCaskill, you blew the whistle on some of these outrageous practices a long, long time ago, and I am really pleased 

that you are here, and that you are joined by your colleague, Senator Blunt, who has been tackling manufacturing for a long time, 

both as a member of the Commerce Committee in the House where 

I also served, which deals a lot with these issues, and as a member 

of the House leadership. So to have all three of you here today is 

especially appreciated. 

We will make all of your prepared remarks a part of the record 

in their entirety. Why don’t you just proceed as you wish? We will 

start with you, Senator Brown. 

STATEMENT OF HON. SHERROD BROWN, 

A U.S. SENATOR FROM OHIO 

Senator BROWN. Thank you very much, Mr. Chairman. Senator 

Thune, thank you. Senator Rockefeller, thank you for your interest 

in this. While we have different views often on these trade agreements, all of us agree that we should be enforcing our trade laws. 

We were going to be joined by Senator Portman today, my colleague from Ohio, but he had to go home. However, he has already 

joined us on a couple of letters to the administration on enforcing 

some of these trade laws, and I know his comments will ring pretty 

similar to, I think, Senator Blunt’s and Senator McCaskill’s and 

mine. 

I first want to applaud you for examining the issue of duty evasion. For a State like Ohio where manufacturers compete in 

energy-intensive and trade-exposed industries, from steel to solar, 

Customs enforcement is a critical complement to the enforcement 

of our trade laws. But when duties on unfairly subsidized or 

dumped products are evaded, it is not just cheating, it is getting 

caught and then ignoring the penalty, as I think your e-mail with 

the Chinese exporters showed. 

I figure it like this. If a persistent reckless driver, instead of paying his speeding tickets and slowing down, simply buys a radar detector, the problem is not solved, and the danger still exists. In 

6 

many ways, that is what our manufacturers face when foreign companies create schemes to avoid antidumping and countervailing 

duty laws. They do not pay the ticket, they just find a way to keep 

evading the law. 

Like my colleagues on the panel, I have testified before the International Trade Commission; Senator Rockefeller has, too, nearly a 

dozen times over the past 4 years. I have stood before the ITC on 

behalf of Ohio manufacturers who produce all sorts of everyday 

products that Americans use, from the tires people buy to drive 

compact cars and earth-moving tractors, or the steel used in pipes 

and vehicles and energy products, or even paper products like the 

thermal paper receipts are printed on, which is why Ohioans ask 

for their receipts. 

There are at least 20 industries with ties to Ohio that have received affirmative decisions in antidumping or countervailing duty 

investigations at the ITC since 2006. We know that our AD and 

CVD laws work. They level the playing field. They allow employers 

to retain and create jobs. Without strong trade enforcement, Ohio 

communities like Youngstown, Warren, and Lorraine, all cities 

with steel pipe manufacturers, to Finley, OH, where they manufacture tires, to West Carrollton, and Hamilton in southwest Ohio, 

which manufactures all kinds of paper products, including coated 

paper, these companies would be without recourse when they are 

pitted against unfairly subsidized imports. 

Too many Chinese importers are able to under-sell us by significant margins, which is only possible because of Chinese government subsidies to their producers, to their exporters, and by harmful dumping practices. When these duties are so easily evaded, they 

become meaningless. I think in the second panel you will hear 

more about that. 

According to a report issued by your subcommittee, foreign companies that face trade duties and are direct competitors to Ohio 

manufacturers of steel nails, light-walled pipe, tooled paintbrushes, 

diamond saw blades, and oil-country tubular goods, all have proven 

they will go to any lengths to avoid paying duty, including by shipping the products through a third country. You will hear the second panelist’s story of China sending oil-country tubular steel pipes 

through Turkey, as an example, and evading our Customs. 

So I applaud you for taking on this issue. I support your efforts 

and believe a legislative approach is warranted to ensure that 

there is consistent enforcement of our trade remedy laws. I want 

to note that this hearing is particularly timely, as our trade enforcement laws are under attack at the World Trade Organization. 

This spring, a WTO appellate body, as you know, Mr. Chairman, 

reversed a prior WTO ruling that upheld the use of our trade remedy laws against China. Right now, the Chinese government is said 

to be planning a $1.5-trillion, 5-year investment in seven strategic 

manufacturing industries. In some sense, we ain’t seen nothin’ yet. 

At a time when we need to enforce trade remedy laws to fight 

this clearly unfair Chinese subsidy, the appellate body overreached 

and threatens to dilute the power of our own laws. To make sure 

that does not happen, several Senators, including Chairman 

Wyden, Senators Portman and McCaskill, joined Senator Snowe 

and me in writing a letter to Ambassador Kirk, urging the adminisVerDate Nov 24 2008 17:26 May 30, 2012 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 R:\DOCS\74204.000 TIMD
7 

tration to take all steps necessary to rectify this ruling. These steps 

include pushing negotiations in the Doha Round to ensuring that 

our countervailing duty law remains fully applicable to China. 

I thank you for allowing us to testify. 

Senator WYDEN. Thank you, Senator Brown, for an excellent 

statement, and also your graciousness with respect to Senator 

Portman. He did call just as we were coming in, saying he had a 

family matter and had to jump on a plane to Ohio. But it is great 

to have the two of you teaming up and being outspoken advocates 

on this issue, and I thank you. 

Senator McCaskill, welcome. 

STATEMENT OF HON. CLAIRE McCASKILL, 

A U.S. SENATOR FROM MISSOURI 

Senator MCCASKILL. Thank you, Mr. Chairman. I want to thank 

you for the opportunity to testify today, and to the other members 

of the committee, and all of your leadership on this issue. I want 

to give a particular recognition to your staff and the investigation 

that they did. So often around here, all of us rush to the cameras 

and take credit, and we do not pause and recognize the people who 

sit in the chairs behind us on the dais who do very hard work. 

I think the investigation that this committee did should be embarrassing to the United States of America, because it is obvious 

that we have put laws on the books that we are making no effort 

to enforce, which basically says that we do not have the respect for 

our laws that we teach kids in middle schools around America. 

I also want to thank my colleague, Senator Blunt, who is here. 

Obviously I want to thank Karl Glassman from Leggett and Platt 

who is here, a great Missouri company that has been harmed by 

the problems that we are talking about today. 

This is important in Missouri. You know, if we sat around and 

tried to add up all the money that our government is spending trying to create jobs, look at the incentives that every locality is trying 

to offer companies to locate in their community, look at the money 

States are spending to try to attract manufacturing to their States. 

Look at the amount of time we spend in these halls talking about 

job creation and how much we care about it. And then we allow— 

we allow, we are complicit in allowing—our Federal Government to 

ignore laws that are doing more harm in my State in terms of job 

creation than many other things that we spend more time on. 

If you look at Leggett and Platt, if you look at Mid-Continental 

Nail, if you look at M&B Metal Products in Missouri, they have all 

suffered from the problem that we are discussing today. M&B 

Metal Products had to close the plant in western Missouri because 

of the failure to enforce these provisions. These duties are not imposed lightly. 

I mean, I am trying to figure out, why do we even have the ITC? 

Why do we not save the money? If these companies are going to 

spend the time and effort and go through the very rigorous process 

of getting these duties imposed, and then we are going to pretend 

like they do not mean anything, it seems to me that that is another 

waste of money. If we are going to impose these duties, then it is 

time that our government decides that it is important that we enforce them. 

8 

We are seeing more evidence of duty evasion, widespread evasion. I am not convinced that Customs and Border Protection is 

committed to enforcing these laws. I think they have been ignored 

and not taken seriously for so long, that it is part of the culture. 

Many companies that have brought specific complaints to Customs 

and Border Protection say that Customs has not followed up on 

those complaints. Many have complaints of evasion that were made 

years ago, and Customs only began tracking this problem in 2008. 

It is good they pay more attention now, but their track record still 

leaves much to be desired. 

I have asked Customs to provide me with a list of all the allegations it has received since 2008 and what it has done to respond 

to these allegations. According to that data, Customs has never initiated an investigation into duty evasion on its own. It only responds to tips. So what Customs has not done is the very basic 

work that your committee staff did, Mr. Chairman. As your committee found out, they are actually advertising duty evasion on 

their websites. This is not difficult to determine that this problem 

is ongoing. 

The data shows Customs takes an average of 4 months to close 

an investigation. In many cases, closing a case means referring it 

to its own field office or Immigration and Customs Enforcement for 

further action. It can take 9 months just for Customs to refer an 

allegation to its own field office. I am hopeful, Mr. Chairman, that 

this committee can ask Customs, why does it take so long for Customs to refer an allegation to Customs? This should not be a difficult process. 

Another problem is Immigration and Customs Enforcement. 

They are in charge of prosecuting criminal allegations. I have 

asked ICE to tell me how many allegations they have received. ICE 

has said it cannot provide that data, so we cannot judge how seriously it is taking this problem. ICE has told my staff that one of 

the biggest problems it faces is fly-by-night import companies that 

disappear before its attorneys can prosecute. 

With all due respect, Mr. Chairman, we have tremendous law enforcement capabilities in this country. I have been honored and 

blessed to have the opportunity to participate in law enforcement 

activities in this country. I am confident that we have the ability 

to criminally go after these people and that it will deter future actions like we are obviously aware are occurring on a daily basis in 

this country. Missouri jobs are at stake here, Missouri companies 

that have invested their own money trying to do the job the government should be doing. They should not have to go into their own 

pocket to try to enforce the law. 

I appreciate the work this committee is doing, and I stand ready 

and able to help in any way I can to solve this problem on behalf 

of jobs in this country and jobs in the State I love dearly. 

Thank you, Mr. Chairman. 

Senator WYDEN. Senator McCaskill, thank you for a very powerful statement. You brought this to us early on, laying out some of 

the problems Missouri companies were having, and you have obviously done a lot of homework since then in terms of gathering your 

own facts. So we are going to be calling on you often as we put together a bipartisan coalition on this, and I thank you for it. 

9 

Senator Blunt, you have also picked up a lot of expertise over the 

years on these business issues. We welcome your comments in any 

fashion you would like. 

STATEMENT OF HON. ROY BLUNT, 

A U.S. SENATOR FROM MISSOURI 

Senator BLUNT. Thank you, Mr. Chairman. I am glad to be here 

with you and Chairman Rockefeller, and the ranking member, Mr. 

Thune. 

I believe in trade. I think we have the most competitive workforce in the world. We have the most competitive businesses in the 

world. But in the trade environment, and in some of the trade 

agreements you are going to be talking about in this committee, we 

quickly start talking about the importance of compliance, and the 

WTO, and all the enforcement organizations, and we have to insist 

that those enforcements are meaningful. 

I want to talk a little bit about some of the things my colleague, 

Senator McCaskill, talked about in terms of the companies involved. We have these Missouri companies and Missouri jobs that 

are out there doing everything they can to compete, not only here, 

but internationally, and then to find out they are competing here 

with people who are not following the rules. 

In fact, both of the two companies that I want to mention 

today—and Senator McCaskill has mentioned them as well—already have orders against, in both cases, China, which is in violation of the trade agreement. So this is not talking about whether 

that process works or whether there is a remedy there—though 

sometimes that remedy takes longer than you would want it to— 

this is talking about our own enforcement of these issues. 

I know 2 years ago I had representatives from Customs and Border Protection and the Department of Commerce in my office in the 

Rayburn Building, when I was a member of the House, to talk 

about these challenges faced by companies. I had been contacted by 

companies like Leggett and Platt, whose home office is in Carthage, 

MO, but they are in 274 other locations in the United States, and 

they are losing more than $60 million a year because of transshipment of inner spring mattresses from China. 

Now, there is already a finding that China is in violation and a 

penalty for anything they would ship in here directly. Of course, 

what you see is China trying to get around that, and unfortunately, 

successfully often, managing to get around that, by shipping those 

somewhere else. Karl Glassman is here, as Senator McCaskill mentioned, and he will be able to talk about this in detail. 

But the frustration of the investment in trying to play by the 

rules here and all over the world, only to see others actively and 

successfully avoid it, is frustrating for big companies like Leggett 

and Platt, and it is frustrating for family-owned companies like 

Mid Continent Nail in Poplar Bluff, MO. And I did say nails. That 

is the nails you build things with. We do make those in this country, and we make them very competitively, but not if others are in 

violation of antidumping orders. There has been such an order on 

Chinese imports, Chinese nails, since August of 2008. This familyowned company, the estimate is, has lost approximately $50 million 

10 

due to transshipment of Chinese nails from a variety of other 

places in Asia. 

I am certainly hopeful that the good efforts of your subcommittee, Mr. Chairman, will continue to work to bring a solution to 

this challenge. I appreciate the hard work you have already put 

into this. I know your staff, my staff, and the staff of everybody in 

this room at this moment, are talking about what we can do to 

bring a bill to the floor that will create the right kind of oversight, 

the right kind of pressure to see that the international framework 

that we ask American businesses and American workers to work 

in is truly enforced. 

I think this problem is solvable. I am becoming more convinced, 

however, that the Congress is going to have to be directly involved 

in prescribing what that solution is, and I look forward to staying 

very engaged in this topic, and to the good work that you and Senator Thune are going to be leading as we try to see that hardworking Americans and hardworking American business owners 

and companies are allowed to compete on a level playing field. We 

all talk about doing everything we can to achieve it, but you cannot 

achieve it unless the enforcement agencies enforce it. Thanks for 

having this hearing. 

Senator WYDEN. Senator Blunt, thank you for an excellent statement. I am also glad that you mentioned the Department of Commerce. Of course, Senator Rockefeller has a great interest in that 

area; as well, the International Trade Administration plays a key 

role in this. I am going to let my colleagues ask any questions. I 

just want to note, after Senator Blunt’s fine statement, we have 

had three witnesses, we now have in this room three Republicans 

and three Democrats. We are now in a position, it seems to me— 

wait a second. We have four Democrats. 

Senator MCCASKILL. I like your math. [Laughter.] 

Senator WYDEN. Pardon me? 

Senator MCCASKILL. It is four and two. 

Senator WYDEN. Four and two. I got my math a little off. Close 

enough for government work this afternoon. We have four Democrats, we have two Republicans. But Senator Portman—and this is 

why I was thinking about this—has been a strong supporter of this 

cause as well. So for the most part, we are perfectly positioned for 

a bipartisan effort now. Senator Snowe has been with us in this. 

We can go forward on this. As Senator Blunt correctly said, we can 

get this solved. That is going to be the key. 

I want to recognize my colleagues for any questions. Senator 

Rockefeller? 

Senator ROCKEFELLER. I do, actually—because I think you all 

said, and you are all practical, grounded, know-your-State people. 

You are not being cerebral about this, you are caring about jobs 

and people, and you know what you are talking about. You are all 

trustworthy, hardworking, great Senators. 

I do not know. I think I have testified 50 times before the International Trade Commission. I do not know that anything has ever 

happened. They never ask any questions. They all sit there. And 

I respect them, and it is a great job, I guess, to have. 

But Senator Blunt, I just resonate with what you say. Their 

job—and right now nothing can be more important than what they 

11 

are doing at any level of enforcement that we are talking about 

than enforcing these rules and getting mean and nasty about it. 

That seems to be our national characteristic, that we talk but we 

do not do. It is just like, sometimes if you have an organization or 

something and somebody does something wrong, you fire that person. We never get around to that in trade enforcement. It is a huge 

part of our economy which is missing because we are so lax on it. 

I do not understand why it is that that is the case. 

I sort of relate to what you say. Actually, you are a Republican 

and I am a Democrat, and I am meant to be saying that and you 

are not meant to be saying that. But you are saying that. We have 

to get the government to lay down the law and figure out a way 

to make the people whose job it is to do this, do it. Actually, that 

is the end of what I had to say. 

Senator WYDEN. Well said, Chairman Rockefeller. 

To further ensure that the numbers are going to be impressive 

to both Democrats and Republicans, Senator Portman has just 

asked that his statement be made a part of the record, and it very 

much tracks what we have heard earlier. 

[The prepared statement of Senator Portman appears in the appendix.] 

Senator WYDEN. So, unless you all have anything to add further, 

we will—— 

Senator BROWN. Can I make one comment about Senator Rockefeller’s comments? 

Senator WYDEN. Of course. 

Senator BROWN. I was listening to Senator Thune at the beginning. One of the reasons we do not have a consensus on trade in 

this country is because every one of these trade agreements is contentious. In spite of almost every newspaper in the country and 

every Harvard economist saying we should pass every trade agreement that any administration, either party, asks us, the public still 

is ambivalent at best, and opposed perhaps to so many of these 

trade agreements when they come down and they are debated. 

A big part of that is that we do not enforce our trade laws, and 

people see that these trade agreements do not work if we do not 

enforce the trade law. While in the end I may not agree with Senator Thune on final passage of some of these laws, I think by doing 

this legislation we will begin to build a much greater consensus in 

the public if we actually do what we say we will do. 

Senator WYDEN. We will excuse you all. Thank you. 

Our next panel this afternoon will be Robert Mahoney, president 

of Tubular Products Group, Northwest Pipe, in Portland; Richard 

Adee, owner of Adee Honey Farms of Bruce, SD; Roger Schagrin, 

chairman of the Government Affairs Committee in Annapolis; Karl 

Glassman, executive vice president and chief operating officer of 

Leggett and Platt in Carthage, MO; and Marguerite Trossevin with 

the Retail Industry Leaders Association. 

All right. Mr. Mahoney, welcome. Portland, OR, out in force 

today, and we thank you for it. We will make your prepared remarks a part of the hearing record in their entirety. Why don’t you 

go ahead and summarize your views? Take 5 minutes or so, if you 

can. 

12 

STATEMENT OF ROBERT L. MAHONEY, PRESIDENT, TUBULAR 

PRODUCTS GROUP, NORTHWEST PIPE COMPANY, PORTLAND, OR 

Mr. MAHONEY. Thank you very much. Good afternoon, Chairman 

Wyden and members of the committee. My name is Bob Mahoney, 

and I am the president of the Tubular Products Group of Northwest Pipe Company. 

I am proud to have graduated from the U.S. Military Academy 

at West Point and serve as a captain in the Army prior to receiving 

an MBA from the University of Virginia. I have been with Northwest Pipe for the past 19 years. 

Northwest Pipe Company operates 6 plants in the United States, 

producing water transmission pipe in California, Colorado, Oregon, 

Texas, Utah, and West Virginia. We also operate 3 plants producing steel tubular products in Kansas, Louisiana, and Texas. 

Northwest Pipe has been involved in four recent sets of trade 

cases involving imports of pipe and tube products from China that 

are produced by our Tubular Products Division. These cases were 

filed during the period 2007 through 2009, and involved circular 

welded pipe, light-walled rectangular tubing, API line pipe, and oilcountry tubular goods, or OCTG. 

In all four cases, the Department of Commerce found that imports from China were both subsidized and dumped, and the U.S. 

International Trade Commission determined that these imports 

from China either injured the U.S. industry or threatened U.S. industry with injury. 

Our response to this trade relief has been to invest heavily in 

each of our three facilities, resulting in a doubling of our total Tubular Products Group capacity and the hiring of 150 new employees since 2009. These investments and expansions at these facilities have allowed our company to become a supplier of OCTG and 

line pipe to many of the new shale drilling areas for oil and gas 

in the United States. 

Unfortunately, our company and other members of the pipe and 

tube industry that participated in these cases have seen numerous 

examples of fraudulent circumvention of the intended relief. This 

includes reports of Chinese pipe that is merely threaded in Vietnam and then mislabeled as Vietnamese products. This continues 

despite current Customs rulings that state simply that threading 

and coupling pipe does not change the country of origin. 

In addition, our industry has received reports about light-walled 

rectangular tubing from China imported in bundles and placed inside containers that contain granite countertops. Neither the Chinese tubing nor the 250-percent dumping duties are being declared 

to U.S. Customs. 

Clearly, the worst and most egregious example of Customs fraud 

came at an industry event that I attended in Houston last month, 

where an importer of OCTG from Asian countries was also a guest 

speaker. In front of a crowd of approximately 300 participants involved in the energy tubular industry, this gentleman described 

how, when visiting an OCTG mill in Indonesia, he personally saw 

workers in the plant painting over ‘‘Made in China’’ and the Chinese mill API markings and putting ‘‘Made in Indonesia’’ and the 

Indonesian company’s API license number. This statement at that 

13 

conference was then published in the American Metal Market, which is a widely read publication in the steel industry. 

Senator Wyden and members of the committee, I have three comments about this type of fraud. First, the speaker would not identify the name of the Indonesia OCTG mill engaged in this practice 

to myself or Mr. Schagrin, who also attended the conference. I understand that Mr. Schagrin gave the contact information for this 

gentleman, as well as the AMM article, to officials at the U.S. Customs and Border Protection so that they could obtain, directly, information about this fraud. 

Second, it is in some ways indicative to me of the widespread acceptance and acknowledgment of the transshipment fraud that is 

occurring with Chinese products that someone would not think 

twice about sharing information on these practices in public before 

a large audience. 

Third, not only does this type of Customs fraud cost Northwest 

Pipe and other producers in the domestic industry money and our 

employees and other workers in the domestic industry jobs and 

work in the mills, there are also serious safety issues. 

The failure of oil well casing or tubing in a well can cause an explosion with injuries to workers on the rig and environmental damage. If an exploration company which depends on mill test reports 

of the mill that is producing OCTG is actually obtaining falsified 

mill test reports, the safety and dependability of that product is 

called into question. 

As a business executive who is responsible for running a division 

of a publicly traded company and one who proposed a significant 

investment to our board of directors for our new Louisiana plant, 

our leadership team and board of directors were depending on the 

CBP to enforce the Nation’s trade laws and collect the appropriate 

duties. When that relief is fraudulently and purposefully circumvented, then the predicate for our business investment decisions is unsupported. 

Senator Wyden, I have had the opportunity to review the ENFORCE Act of 2010 that you and Senator Snowe introduced in August of 2010. As an Oregonian, I am proud to have you represent 

our State in the Senate and thank you for taking a leadership role 

on an issue that is so critical to our company, our workers, and industry. I urge you to continue to work with your colleagues in Congress to enact this legislation. 

Senator Wyden, our industry has been working on this issue for 

some time, and I know that others on the panel today will also tell 

their story about why we must ensure that these laws are enforced 

and that there is an end to widespread, blatant, and egregious Customs fraud. 

Simply put, our company, like many others in this sector, must 

know that when these allegations of fraud are brought to the CBP 

they are acted upon in a vigilant and expeditious manner. Thank 

you for inviting me to appear before the committee today. 

Senator WYDEN. Mr. Mahoney, thank you very much. You made 

the long trip, and I very much appreciate what you had to say and 

your efforts to work with our subcommittee. 

[The prepared statement of Mr. Mahoney appears in the appendix.] 

14 

Senator WYDEN. I think we ought to have Senator Thune introduce our next witness. 

Senator THUNE. Thank you, Mr. Chairman. I want to welcome a 

guest to our committee today. Richard Adee is the owner and operator of Adee Honey Farms, which was founded way back in 1957. 

I think he must have started it when he was about 10 years old. 

But they are a honey production and crop pollination farm, and 

they have, throughout the United States, facilities in Nebraska, 

California, Texas, and Mississippi, in addition to their operation 

headquartered in South Dakota. 

But Mr. Adee’s company is one of the largest beekeeping operations in the United States, with more than 75,000 bee colonies. He 

has been very active in policy and research issues on behalf of the 

beekeeping industry. He is currently chairman of the Legislative 

Committee of the American Honey Producers Association, and has 

also served, I might add, as president of that organization for 15 

years. In addition, he has had a longstanding relationship with the 

scientists and program leaders at USDA’s Agricultural Research 

Service in the Bee Research Labs and frequently consults with 

them on issues relating to honeybee health. 

So his is the quintessential family business. He personifies the 

qualities of entrepreneurship and hard work and has built this 

company to what it is today. I am very honored to have him represent, not only our State of South Dakota, but the honey industry 

here today. I would add that he makes South Dakota a sweeter 

place to live. 

So Richard, welcome. Good to have you here. 

Senator WYDEN. Mr. Adee, please proceed. 

STATEMENT OF RICHARD ADEE, OWNER, ADEE HONEY FARMS, 

AND CHAIRMAN, AMERICAN HONEY PRODUCERS ASSOCIATE 

LEGISLATIVE COMMITTEE, BRUCE, SD 

Mr. ADEE. Chairman Wyden, Ranking Member Thune, and members of the committee, we applaud you for holding this timely hearing on enforcing America’s trade laws. 

My name is Richard Adee, president of Adee Honey Farms, past 

president of the American Honey Producers Association, and current chairman of the Association’s Washington Legislative Committee. I am testifying today on behalf of the association and its 

members. 

Protecting American beekeepers, the domestic honey industry, 

and the billions of dollars in agricultural output that rely on pollination services has been, and should remain, a national priority. 

For the honey industry, our challenges continue to mount each 

year. 

As I speak here today, our industry faces hardships as a result 

of severe duty evasion and Customs fraud. Dubbed ‘‘honey laundering,’’ some have gone as far as calling this the largest food fraud 

in U.S. history. A prominent Toronto newspaper recently ran the 

following headline. It said, ‘‘A Growing Multi-Million Dollar Laundering Scheme Designed to Keep the Endless Supply of Cheap and 

Often Contaminated Chinese Honey Moving into North America is 

Putting the Domestic Industry on the Verge of Crisis.’’ 

15 

Importantly, this trade problem affects all segments of the industry, including honey producers, large pollination-dependent crops, 

packers, importers, and consumers alike. Producers struggle under 

the impact of increasingly divergent market prices, one price for legitimate honey and another rock-bottom price for transshipped 

honey. 

Pollination crops suffered because less honey production means 

less managed bee colonies to pollinate nearly $20 billion in U.S. 

farm output. This includes crops as diverse as almonds, apples, oranges, melons, blueberries, broccoli, tangerines, cranberries, strawberries, vegetables, alfalfa, soybeans, sunflowers, and cotton. In 

fact, honeybees pollinate about one-third of the human diet. Honest 

packers and importers also suffer as they face the decision to either: (1) lose market share to their colluding competitors; or 

(2) participate directly in these illicit and illegal trade schemes. 

Finally, consumers face the risk that illicit, often adulterated 

honey is entering uninspected into the food supply. In past cases, 

Chinese honey has been found to contain antibiotics and heavy 

metals. The European Union has even banned Chinese honey as a 

result. 

Ten years ago, prior to the 2001 antidumping order, China 

shipped nearly 60 million pounds of honey annually to the United 

States. While China now ships very little honey directly to the 

United States, the volume of honey entering transshipped through 

other countries has more than made up for it. Most notably, record 

levels of honey were imported into the United States from Malaysia, Indonesia, India, and Taiwan in 2010. 

Together, these countries exported more than 60 million pounds. 

However, none of these countries has commercial beekeeping operations capable of producing anywhere near 60 million pounds. In 

fact, according to our research and admissions of the Malaysian 

government, that country has only 25 beekeepers with the capacity 

to export a mere 45,000 pounds annually. 

ICE and CBP and the Department of Justice have succeeded in 

prosecuting numerous honey launderers in such places as Chicago 

and Seattle. They have also managed to pressure Malaysia and Indonesia into slowing transshipments in the first quarter of 2011. 

However, just as one hole is patched, another springs open. For example, imports from Vietnam have surged more than 1,000 percent 

since the same time last year. Similarly, there are reports of more 

than 100 containers of honey that have been shipped in 1 day from 

regions within India that produce a mere 20 containers in an entire 

year. 

As I like to say, it is comparable to a chop shop operation. You 

can catch as many car thieves as possible, but as long as the chop 

shop goes undisturbed they will simply find another thief, and just 

as many cars will go through the shop and as much economic harm 

will be done. Therefore, while we continue to support the targeted 

enforcement of foreign producers and importers, we also strongly 

urge shining a bright light on the demand side of the equation. 

Without certain packer and importer collusion, there is no market for transshipped honey, and, without a market for transshipped 

honey, domestic producers and companies that believe in fair play 

16 

can flourish. We are prepared with data and information to assist 

in further investigations and prosecutions. 

In addition, we strongly urge this committee to revisit the New 

Shipper Bonding Privilege, a one-time lucrative loophole for Chinese producers and exporters willing to break the law until Congress closed the loophole in 2006. Unfortunately, the fix was only 

temporary and expired in 2009. Market data suggest that certain 

shippers may be laying the foundation to again exploit this loophole to the detriment of the domestic honey market. 

By slowing the demand for transshipped and other illicit honey, 

closing the new shipper loophole, providing more tools for our officials at CBP, Customs, and ICE, and by better ensuring communications with industry stakeholders and between agencies, this 

committee can help to minimize the risk of adulterated honey being 

sold as pure honey in the U.S. food chain, restore the integrity of 

U.S. trade law, collect substantial antidumping duties for the U.S. 

Treasury, and preserve the domestic honey industry, as well as the 

agricultural sectors and the agricultural sector jobs that rely on it. 

I thank you and look forward to any questions you may have. 

Senator WYDEN. Thank you very much, Mr. Adee. That was very 

helpful. All I could think about as you were speaking is, you are 

certainly pollinating us with good ideas, and we thank you for it. 

We have Mr. Schagrin, chairman of the Government Affairs 

Committee, Committee to Support U.S. Trade Laws. Welcome. 

STATEMENT OF ROGER SCHAGRIN, CHAIRMAN, GOVERNMENT 

AFFAIRS COMMITTEE, COMMITTEE TO SUPPORT U.S. TRADE 

LAWS, ANNAPOLIS, MD 

Mr. SCHAGRIN. Thank you, Mr. Chairman, Senator Thune. Since 

you will accept my rather long testimony and all the charts for the 

record, I would just like to summarize that testimony and hit the 

main points. 

I have been practicing international trade and Customs law since 

graduating from UVA Law School 30 years ago. I have had my own 

law firm for the past 27 years. As you mentioned, my colleagues 

in town have chosen to make me chairman of the Government Affairs Committee of the Committee to Support U.S. Trade Laws, 

which is a very broad-based, ad hoc committee of trade associations, manufacturers, agricultural interests, and unions. 

I also serve as the general counsel of a group called the Committee on Pipe and Tube Imports, which has over 40 U.S. producer 

members in 29 States, including two in the great State of Oregon. 

I have been personally responsible for obtaining 21 different antidumping and countervailing duty orders against imports from 

China across a wide variety of industries, and in many of these 

cases I represent unions as well as the producers in these product 

areas. 

I have been visiting Customs ports for 27 years. I have probably 

made over 100 port visits, and I am very well-acquainted with Customs import specialists and agents in both CBP and ICE. I will say 

that CBP import specialists and agents at the ports are among the 

hardest-working government servants that I have met in my career. However, they face an onslaught of fraud. They need more reVerDate Nov 24 2008 17:26 May 30, 2012 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 R:\DOCS\74204.000 TIMD
17 

sources, more leadership, more incentives, and they actually need 

a system to work with them. 

Now let me summarize the problem. The Chinese built up statesupported industries with massive over-capacity, enough to supply 

not only the Chinese market, the U.S. market, but sometimes entire world markets. Through currency manipulation and government subsidies, China achieved an over $275-billion trade surplus 

with the United States last year in 2010. 

In the past decade, about 80 percent of all new U.S. antidumping 

and countervailing duty orders are against imports from just 

China, so you can tell that they are the preponderance of the problem. The United States is not alone. In many product areas in 

which I work, I work with industries and counsel in other countries 

such as Canada, Mexico, the E.U., India, Australia, Brazil, and Argentina that have imposed antidumping duties against these same 

imports from China. 

The response of the Chinese has not been to reduce capacity, to 

curb exports, but instead has been an active government-sustained 

effort to evade duties and maintain employment. Duty evasion is 

endemic with our orders against China. As your staff found in that 

wonderful November 8, 2010 report on duty evasion, about three 

out of every four Chinese companies contacted were willing to shift 

country of origin to avoid duties in the United States. 

There is, in fact, a whole new freight industry in China whose 

sole purpose is to evade duties by changing country of origin. Now, 

we brought this to the attention of CBP about 3 years ago, hoping 

that they would work with the government of China to shut down 

these operations that are engaged in criminal activities. Instead of 

seeing any of them shut down, we have actually seen a proliferation. Where there was just a few, now there are dozens of companies in China engaged in these activities. 

The main problem is, we take evidence on evasion to CBP both 

in the ports and headquarters on a regular basis. While the responses are cordial and serious, there is never any feedback, and 

we see the problems, as already described today, continue to multiply and increase so we are losing ground, not gaining ground, in 

enforcement. 

The answers are clear, Mr. Chairman. We must have a legislative fix to this problem. We must have timelines in which CBP 

must have a system in which petitions on duty evasion are acted 

upon and resolved within a certain amount of time. We must have 

access to Customs data under administrative protective orders so 

we can use the expertise we have gained in representing these U.S. 

industries and agricultural segments in order to help Customs in 

the same way we currently use that expertise under administrative 

protective orders with the DOC in their investigations. 

To finalize, I can tell you on behalf of all the attorneys who represent domestic industries, agricultural concerns, and unions in obtaining these orders against imports, we are ready to work with 

CBP, with ICE, with your committee, with your professional staff, 

with the retail groups, with whomever it takes to hammer out acceptable solutions. We cannot let the perfect be the enemy of the 

good. 

18 

We do not want to harm, as Senator Thune said, businesses of 

legitimate, honest importers in any way. But lawlessness—and 

that is exactly what is occurring every day, every hour, every 

minute in U.S. ports—at U.S. ports must be stopped and must be 

stopped now. I urge this committee to get on with your agenda, to 

work with us, to fashion legislation, get it introduced, passed, and 

signed by the President. 

Thank you very much. 

Senator WYDEN. Well said. It is compelling to hear you say in 

particular that you do not want to harm the legitimate importers. 

You have certainly a strong role to play with folks who face serious 

problems, but to have you say specifically and bluntly that you do 

not want to do anything to harm reasonable importers is an important message, and we thank you. 

[The prepared statement of Mr. Schagrin appears in the appendix.] 

Senator WYDEN. Mr. Glassman? 

STATEMENT OF KARL GLASSMAN, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER, LEGGETT AND 

PLATT, INCORPORATED, CARTHAGE, MO 

Mr. GLASSMAN. Good afternoon, Chairman Wyden, Ranking 

Member Thune, and distinguished members of this committee. 

Thank you for holding this hearing on a topic that is critical to our 

business, to U.S. manufacturing, and to the integrity of our trade 

laws. 

I am the chief operating officer of Leggett and Platt, a diversified 

global manufacturer headquartered in Carthage, MO. We operate 

in 18 countries and manufacture a wide variety of engineered components and products. Last August when Senators Wyden and 

Snowe introduced the ENFORCE Act to address the growing problem of the illegal evasion of our trade laws, Senator Wyden described trade cheats as ‘‘importers that are increasingly and brazenly employing a variety of schemes to evade AD/CVD orders.’’ I 

want to tell you about our experience with trade cheats. 

Since 1883, Leggett has produced mattress inner springs. Although we now manufacture many other products, inner springs 

are the heart of our business. Chinese inner springs first came into 

the United States in the early 2000s. We manufacture inner 

springs in China. We know that it is not cost-effective to produce 

or ship inner springs from China to the United States. Nevertheless, more and more Chinese inner springs continue to come in at 

prices below our cost of production. 

By December 2007, our U.S. inner spring operations had deteriorated to the point that we filed an antidumping case. As a result 

of this case, inner springs from China are now subject to antidumping duties ranging from 164 percent to 234 percent. Unfortunately, even before the final antidumping order was issued, we had 

evidence that Chinese inner springs were being shipped to the U.S. 

through third countries for the purpose of evading these duties. 

For example, low-priced inner springs from Hong Kong skyrocketed overnight. Before July 2008, no inner springs were 

shipped from Hong Kong. Yet, by September 2008, over 35 container loads per month, easily worth $1.5 million, were being 

19 

shipped here. This made no sense to us, so we hired a private investigator to examine the manufacturing facilities listed on the 

bills of lading. We found no evidence of legitimate inner springs 

production in Hong Kong. 

Since the antidumping duty order went into effect, we have seen 

a huge influx of inner springs from Taiwan and Malaysia. Again, 

these are places where there was no prior production of inner 

springs. We have evidence that over 1 million inner springs are illegally evading our antidumping order every year. This represents 

over $60 million annually in antidumping duties lost to the U.S. 

Treasury on our products alone. If these 1 million inner springs 

were produced in the U.S., it would require over 60 full-time employees earning more than $2.5 million in wages and benefits per 

year. This illegal behavior affects jobs and facilities in 21 States. 

We regularly provided Customs with specific evidence of duty 

evasion. Since October 2008, we have met with or sent information 

to Customs on 21 separate occasions. Despite our best efforts, these 

inner springs continue to be imported into the United States with 

faults and fraudulent documentation. 

This is not an isolated problem. In September of 2009, we and 

four other affected industries formed a coalition to address this 

problem. Today our coalition is comprised of 11 industries, each 

with duty orders that are being illegally evaded. The Treasury 

loses over $400 million each year in unpaid duties to the evasion 

of orders in just eight of these industries. 

Coalition members have met with Customs, ICE, Commerce, the 

USTR, this committee’s staff, House Ways and Means, and the offices of over 100 Senators and Representatives. We must find a solution. The problem with duty evasion is not about trade philosophy, it is about effective law enforcement. We are committed to 

working with all stakeholders to come up with sensible, pragmatic, 

yet above all, effective legislation that ensures we receive the benefit of the trade remedy we have worked so hard for and that our 

laws are enforced. 

Under the status quo, the trade cheats are winning. They openly 

treat our laws with disdain. There can be no global rules-based 

trade without effective enforcement. We support and encourage this 

committee to move forward with legislation to fix this problem. Mr. 

Chairman, Ranking Member, and members of the subcommittee, 

thank you for the opportunity to address you today. I look forward 

to your questions. 

Senator WYDEN. A powerful case against business as usual, Mr. 

Glassman, and I thank you for it. 

[The prepared statement of Mr. Glassman appears in the appendix.] 

Senator WYDEN. Ms. Trossevin, welcome. You are going to be 

speaking on behalf of the Retail Industry Leaders Association, and 

we want to work closely with you. 

STATEMENT OF MARGUERITE E. TROSSEVIN, JOCHUM, 

SHORE, AND TROSSEVIN, ON BEHALF OF THE RETAIL INDUSTRY LEADERS ASSOCIATION, ALEXANDRIA, VA 

Ms. TROSSEVIN. Thank you, Chairman Wyden, Ranking Member 

Thune, and members of the subcommittee. I am pleased to appear 

20 

before you today on behalf of the Retail Industry Leaders Association. RILA’s members include more than 200 retailers, manufacturers, service suppliers, with aggregate sales of more than $1.5 trillion annually. With more than 100,000 stores, manufacturing facilities, and distribution centers across the United States and abroad, 

RILA members play a critical role in the manufacture and distribution of goods throughout the United States and abroad, creating 

well-paying jobs for millions of Americans. 

By way of introduction, I am Marguerite Trossevin of the law 

firm of Jochum, Shore, and Trossevin, and international trade 

counsel to RILA. I have more than 25 years of experience in antidumping and countervailing duty law, including more than 13 

years at the Department of Commerce, where I was Deputy Chief 

Counsel for Import Administration, the agency responsible for administering the U.S. antidumping and countervailing duty laws. 

RILA members depend on global supply chains and firmly support free and fair trade. We share the chairman’s view, as I believe 

do most American businesses, that fraudulent evasion of the law 

is costly and harmful to the U.S. economy. RILA members do not 

want to compete with bad actors, nor do they want to do business 

with them. Unfortunately, it is inevitable that there will be some 

who try to circumvent the law. The question then becomes, does 

more need to be done to address the problem and, if so, what? 

In approaching this issue, RILA respectfully suggests that the 

chairman and members of the subcommittee keep the following 

principles in mind. First, the overwhelming majority of importers 

does play by the rules. Members of RILA and other importers 

spend millions of dollars to ensure compliance with U.S. law and 

participate in trusted importer programs such as C–TPAT and Importer Self-Assessment, and they do work closely with Customs to 

identify transactions of concern from a commercial or security 

standpoint. It is important to recognize these efforts and ensure 

that legislation does not stifle, disrupt, or overburden this legitimate trade. 

Second, the current lines of authority between Commerce and 

Customs should be preserved. Commerce and Customs each have 

unique capabilities and expertise and well-defined responsibilities 

in enforcing antidumping and countervailing duty orders. 

Specifically, Commerce has exclusive authority to determine 

what AD/CVD rates and what products fall within the scope of an 

AD/CVD order. Thus, in any dispute over whether a product should 

be subject to duties, Commerce has the final say. For example, 

Commerce has the authority to address situations in which exporters circumvent an AD/CVD order by making minor changes in the 

product or shipping the parts and components to another country 

for final assembly or minor processing. 

Commerce therefore has the authority to ensure that the disciplines of an AD/CVD order are properly applied, and having that 

authority rest with one agency promotes consistent, efficient, and 

effective enforcement. Meanwhile, CBP has the expertise and authority needed to address fraudulent evasion of duties such as 

falsely declaring the country of origin of goods transshipped 

through a third country or intentionally misclassifying imports subject to AD/CVD orders. 

21 

Customs already uses this broad authority to impose civil and 

criminal penalties in such cases, and they can, and do, work cooperatively with Commerce on enforcement. Blurring these lines of 

authority would create unnecessary inefficiency and confusion that 

would undermine rather than enhance effective enforcement. 

Third, in order to resolve a problem, it is necessary to clearly define it in the first instance. Certain issues, such as the proper Customs classification of goods or the interpretation of the scope of an 

AD/CVD order, can be complex issues on which reasonable minds 

can differ. 

Commerce and Customs already have procedures in place for resolving these issues and, as we understand it, they are not the concern being addressed here today. Rather, the problem being addressed is fraudulent evasion of AD/CVD duties which by definition, as you have heard here today, entails an intentional scheme. 

Therefore, importers should not be exposed to substantial penalties without regard to intent. Those who make a good-faith effort 

to properly declare the classification, country of origin, and duties 

applicable to their imports are not currently exposed to penalties, 

such as retroactive duty assessment, nor should they be. 

Finally, in seeking to catch bad actors, Congress should not create innocent victims or disrupt legitimate trade. Any legislation 

considered should therefore be balanced, not overly broad, have 

clear and reasonable standards, and ensure full procedural due 

process. 

Moreover, as Congress explores ways to improve enforcement of 

our AD/CVD laws, we urge you to give careful consideration to the 

potential benefits of a prospective duty assessment system. Our 

current retrospective system is highly unpredictable, costing legitimate U.S. businesses millions of dollars in unanticipated rate increases. 

Both the GAO and Treasury have identified it as a significant 

factor in Customs’ inability to collect hundreds of millions of dollars 

in AD/CVD duties each and every year. We believe Congress can, 

and should, develop a prospective duty assessment system that provides both an effective remedy against unfair trade and greater 

predictability in the global supply chains that are so critical to U.S. 

manufacturers, processors, distributors, and retailers. 

On behalf of RILA and its members, I thank you for the opportunity to appear here today and would be happy to answer any 

questions. 

Senator WYDEN. Thank you. And it is our intent to work very 

closely with you and to follow up on your suggestions. 

[The prepared statement of Ms. Trossevin appears in the appendix.] 

Senator WYDEN. Let me start with you, Mr. Glassman and Mr. 

Schagrin. You know, you all brought these concerns to Customs. 

You have been armed with information. You, Mr. Glassman, just 

sort of rattled off this eye-popping statistic, that in your judgment 

something like $60 million is being lost to taxpayers in this country 

just with your company alone. So we are talking about very substantial losses to taxpayers. We are talking about significant job 

consequences as a result of all this. 

22 

So let us just start. When you, Mr. Glassman, and you, Mr. 

Schagrin, bring this to the attention of the Customs agency, how 

do they respond to you? What do they do when you tell them about 

this? 

Mr. GLASSMAN. Mr. Chairman, in our particular case, they take 

the data and are basically non-responsive. We believe that they are 

certainly dedicated, hardworking civil servants, but the data goes 

into a black hole. We see no ultimate responsiveness. We see no 

resolution of the fraud that is perpetrated on our employees every 

day. 

Senator WYDEN. Mr. Schagrin? 

Mr. SCHAGRIN. Mr. Chairman, I would echo Mr. Glassman’s remarks. We are probably filing information under the e-Allegation 

system with Customs on the average of about once a week. We are 

probably meeting with Customs officials in headquarters in Washington on the order of once a month or once every other month, 

meeting with Customs’ Import Specialists and Agents at ports 

every 2 or 3 months. The response is always the same: thank you 

for the information; we will try to act upon it. On every attempt 

to follow up with CBP, the answer is always, due to the Trade Secrets Act and the fact that import information and Customs filings 

are confidential, they cannot give us any response. So once again, 

for all these industries, the proof is in the pudding. 

What do we do? We go to all of our clients and we say, what is 

happening now? All we see, even after making these reports to 

CBP, is that the amount of duty evasion keeps increasing. If we get 

Customs in L.A. and Long Beach to do the investigation of a certain importer, the next thing we know is that containers are arriving in San Francisco instead of L.A. or Long Beach. So there is 

some port shopping. Well, gee, they are looking at us in this port, 

let us go to another port and then put it on a truck. 

We have even had the International Trade Commission make 

public information they would normally treat as confidential, where 

they are finding in the context of their investigations that there is 

a massive amount of misclassification of products in order to evade 

the suspension or liquidation of duties on entries. In a recent case, 

they said publicly over $60 million of imports, subject to duties 

ranging from 100 to 200 percent, were misclassified during the period when that investigation was pending. 

So it is always the same response for these industries, whether 

their factories are operating or they are not recalling employees. 

The proof is always in the pudding, and we just see duty evasion 

continuing to proliferate without it being stopped by CBP. It is extremely frustrating. 

Senator WYDEN. To have companies produce significant information documenting this level of loss and to have essentially no response at all demonstrates a broken system. That is what really 

concerns me. I think one other question for you, Mr. Glassman, Mr. 

Mahoney, Mr. Adee. What else can be done to document the number of jobs that are affected by these issues relating to antidumping 

and countervailing duties? I assume that you have to say significant numbers of jobs are in jeopardy when the government just 

sort of goes through the motions, as you all have described, in enVerDate Nov 24 2008 17:26 May 30, 2012 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 R:\DOCS\74204.000 TIMD
23 

forcing the trade laws. But what else can you tell us this afternoon 

to further document job loss? 

Mr. GLASSMAN. Mr. Chairman, in our particular case we believe 

there are approximately 2,500 jobs that are protected in U.S. inner 

spring manufacturing by the duty orders. They would be in the 

manufacturing, sales, and distribution of those products. Prior to 

the orders being issued, we were closing facilities, we were laying 

off people, we were changing our processes. As a result of the orders, we expected that we could reengage U.S. manufacturing. We 

thought that we could reopen facilities. As my testimony spoke to, 

we believe that those million—and that was a conservative number—inner springs are costing 60 employees jobs every day. 

Senator WYDEN. Mr. Adee and Mr. Mahoney, do you want to add 

anything else on this jobs issue? 

Mr. ADEE. Yes, I would. About 25 years ago, this country had 4 

million colonies of bees. Today we only have 2 million colonies of 

bees. That really hurts our pollination efforts. It takes about one 

employee per thousand colonies, so a net loss of 2 million colonies 

means we lost probably about 2,000 jobs just in the beekeeping operation. 

In the honey producing part of it, a little over 10 years ago the 

U.S. market was filled by 60 percent domestic honey, 40 percent 

imports. And we do need some imports, but we need legitimate imports. Today, it is a real reversal. We have 35 percent of the market that is filled with domestic honey and 65 percent with imports, 

so it really has cut into our jobs here in the United States in the 

honey business. 

Senator WYDEN. Mr. Mahoney? 

Mr. MAHONEY. Mr. Chairman, there is no doubt, I know in my 

bones, that it is a knife to our throat. But I really have to do some 

research to give you a factual answer, so I would like to follow up 

after the hearing. 

Senator WYDEN. Fair enough. 

I had one last question, but I want to recognize my friend and 

colleague for his questions, and I want to come back and have a 

little bit of a discussion with you, Mr. Schagrin, and you, Ms. 

Trossevin, about how we are going to get some common ground to 

get this bill passed and signed by the President to help some companies. 

Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. 

Again, thank you for this excellent testimony. It is very insightful, and I think it provides us a lot of good ammunition as we deliberate things that we might be able to do to help provide solutions 

to this issue. 

But I wanted to again thank you, Mr. Adee, Richard, for being 

here, and I will start my questions by asking you to elaborate on 

the impact of dumped Chinese honey on your business operation in 

South Dakota and the impact on honey producers across the country if our government is unable to effectively stop the flow of Chinese honey currently circumventing our trade laws. 

Do you believe, for example, that CBP and ICE are doing everything within their power to crack down on Chinese honey that is 

24 

being transshipped through countries such as Malaysia, Indonesia, 

and India? 

Mr. ADEE. Yes. First off, I would like to say we were first exposed to some real difficulties with the imports under the New 

Shipper Bonding Privilege that was given to importers. They call 

themselves new shippers, and that way they can avoid paying cash 

duties. They could bond those duties until Commerce found out 

whether they were a new shipper or an old shipper. 

In most cases, they found they were an old shipper with a new 

hat. Then they called for the duties which were supposed to be covered by a bond, and the new shipper invariably disappeared, and 

the bonding companies did not pay the bond. In 2004, 2005, and 

2006, we could not sell honey at the cost of producing it, so we just 

stacked it in a warehouse. Fortunately we had a good bank, and 

in those 3 years we piled up 22,000 drums of honey. After the Congress closed the bonding loophole, then we were able to move that 

honey and at least recover our cost of production. 

As I see it in the future, if we have these problems unresolved 

with these imports, why, it is going to have a severe impact on the 

honey market and on pollination. In several of our commodities, almonds in particular, where they use a million colonies of bees to 

produce almonds, blueberries, those commodities, you cannot 

produce them without honeybees. 

Already, because of the shortage of honeybees, the price has gone 

up for almond pollination. The growers are continually worried 

about having enough bees to do the job for them. So I see, if we 

do not address this problem and we let this honey come in 

unabated, the illicit honey, why, I can see this industry is going to 

be in severe, severe trouble. That impact will not only be on the 

growers and the beekeepers, but the consumer, because we will 

have higher-priced food, we will have less quality food, and we will 

even probably have to go to other countries to get some of the foods 

we like. Every third bite we eat comes from a bee-pollinated plant. 

Senator THUNE. I appreciate the great explanation of the impact, 

if things do not change, that it will have on the industry. 

Let me ask you that second question. That is, do you think that 

the CBP and ICE are doing everything within their power to crack 

down on Chinese honey that is being transshipped through some 

of these countries like Malaysia, India, and Indonesia? 

Mr. ADEE. I think they have targeted several companies, and 

also targeted individuals. They prosecuted some of them. We know 

there is a gentleman up in Seattle serving a little jail time, there 

was such a heavy fine. But as I said in my testimony, you catch 

one of those guys, you catch the guy stealing cars and put him 

away, the chop shop just goes to another guy who steals cars. I 

think we have to go after the colluding packers. We get the 

colluding packers and stop the demand for this circumvented transshipped honey, blended honey, well, when there is no demand, it 

will stop the process. So I appreciate what they are doing, but I 

hope they can do more. 

Senator THUNE. Good. Thank you. 

Let me direct this question, if I might, to any of the panelists 

who cares to respond to it. All of us want to see our trade laws effectively enforced, but we also are conscious of the impact that 

25 

international trade has on our economic growth. As such, I would 

like, if you could, to sort of give me your opinion as to how we ensure an appropriate balance between enforcing the AD/CVD laws 

and expediting the movement of legitimate trade into and out of 

the country. Mr. Schagrin maybe, and then Ms. Trossevin, that 

would be a good one, maybe, for you to take a whack at too. 

Mr. SCHAGRIN. Well, yes, Senator Thune. Of course, among all 

the clients we represent, these are not only import-sensitive industries, but, because they are very competitive, they are major exporters as well, and so we are very much supportive of the appropriate flow of goods from both an import and export perspective. 

In fact, we find, in many of our export markets, that we are competing against, once again, not only unfairly traded imports from 

China, but often unfairly traded imports that are once again evading duties assessed in other countries against the Chinese in some 

of these export markets. 

However, in order to be a major exporter, you have to still be in 

business. In a lot of these areas, the competition from China is so 

massive and overwhelming that, without the duty relief—and this 

is in my testimony—the last U.S. producer of indigo, which colors 

our blue jeans, went out of business while Customs was investigating massive transshipment of indigo from China, resulting in 

no more U.S. industry, and so the order was sunset. So we have 

to get effective enforcement. 

I think having worked with Ms. Trossevin when she was at the 

Department of Commerce—she talked about Commerce’s role in 

stopping circumvention, where products undergo a minor alteration 

in a third country before they come to the U.S. Commerce does an 

excellent job at that. They have rules prescribed in the 1988 Trade 

Act which call for a filing of petitions, initiation of petitions, statutory timelines for finishing those, and then giving the results and 

telling Customs about the duty assessment after that circumvention. 

We need something similar at Customs for the other issue that 

we are mostly addressing today, which is transshipment, because 

Commerce has said they have no role to play in transshipment. We 

have asked them, will you investigate transshipment and disguising country of origin the way you address circumvention, and 

they have said, no, that is not covered by the 1988 Act. 

So this shifting of product—and I think Ms. Trossevin said this 

in her testimony—is within the realm of Customs and Border Protection. They have to say that this honey going through Malaysia 

or India, or pipe going through Vietnam or Malaysia or Turkey, 

that it is really Chinese and is just having a disguised country of 

origin. 

Customs has to say that is subject to the AD/CVD duties because 

it is of Chinese origin, but they do not have any timelines for it. 

So we really need a system which I think—if Ms. Trossevin is 

happy with the way the circumvention system works at Commerce 

where she used to be employed, then I would think retailers would 

be happy to have a similar type of system on transshipment over 

at the CBP. 

Senator THUNE. All right. 

26 

Ms. TROSSEVIN. Thank you. I do believe that the circumvention 

system at the Commerce Department works very well. It is important to understand, though, a couple of things about the nature of 

that process. First of all, what that inquiry is really looking at is 

whether those products really should legitimately be brought within the scope of an order, so it is really treated or dealt with under 

Commerce’s normal authority to do scope rulings. 

I will also note, in terms of your question about balance, when 

Commerce does a formal scope inquiry, the results of that inquiry 

do not apply retroactively prior to the date of initiation of the inquiry. That sort of recognizes the idea that importers do not necessarily have any way of knowing that certain goods that they may 

be buying that were assembled in Thailand or wherever would be 

deemed to be circumventing an order, so they are not going to be 

subject to duties for things that they purchased prior to being on 

notice that that might be an issue. 

I think that one of the things we face as a problem in terms of 

the Customs fraud case is that it is a little bit different animal, because here you really are talking about intentional schemes, criminal activity—well, at least something that often rises to the level 

of criminal activity. So, I think it does produce a couple of different 

types of challenges that have to be looked at in terms of striking 

that balance. 

Again, because the fraud and evasion are serious crimes or serious infractions of the law, they carry serious consequences, very serious consequences. I think it is very important again to recognize 

that, if you have an importer who is not part of that scheme, that 

they should not be suffering those types of consequences. 

The other thing is, I think we have heard a lot of people today 

who do praise U.S. law enforcement. We have great law enforcement, and I personally put Customs in that category. But law enforcement is a tough business, and I think we have to take care, 

before we jump to the conclusion that, just because crime continues, that does not mean law enforcement is not doing everything 

they can. We have great men in blue, and we have great Customs 

officers at the border, but there is going to still be crime. Whether 

they are doing their job full out 24/7, there is always going to be 

crime. It is a painstaking process to investigate criminals. 

I think Customs in particular faces challenges, because so much 

of what happens that is critical to these schemes happens outside 

the U.S. jurisdiction. You cannot underestimate the difficulties of 

reaching extraterritorially in cases of Customs fraud. 

So, from my perspective, it is a really important problem, but I 

think focusing on some of the challenges of enforcement, not just 

the process—I think transparency is important, I think a domestic 

producer or whoever brings an allegation to Customs has a right 

to understand or hear what happened to that in some reasonable 

period of time. 

But I think you also need to look at the challenges Customs is 

facing and really focus a lot on giving them the tools they need to 

do a better job. You can always improve, there is no question, but 

do a better job. Improve Customs cooperation agreements with 

other countries. Negotiate more agreements. Work on those issues 

in our trade agreements. That will give Customs the tools they 

27 

need to deal with a lot of these bad actors who are not within their 

jurisdiction here. It is much easier for them to deal with the people 

who are physically here in the United States, and I think they generally do a really good job of that. 

Senator THUNE. Thank you. 

Mr. Chairman, thanks. 

Senator WYDEN. Ms. Trossevin, we are going to work very closely 

with you and Mr. Schagrin in particular, but I am concerned about 

your last statement that there are these consequences, and the system is really working. I mean, by our calculation, Customs is collecting only 1 percent of the duties and penalties they assess to 

evasion of the antidumping laws. That does not strike me as sort 

of a pillar of effectiveness in terms of getting this right, and that 

is why we are having the hearing, because those are the kinds of 

consequences that companies and taxpayers are bringing to us. 

So let me see if I can walk you and Mr. Schagrin through some 

areas that hopefully we can have some agreement on, because we 

would like to work closely with you and would like to find some 

common ground, and get this legislation passed. 

So, really three areas that I would hope that we could get you 

all to say, we have to get going, these are areas we can work together on. Mr. Schagrin, do you agree that legitimate allegations 

of evasion ought to be quickly pursued and investigated? 

Mr. SCHAGRIN. Yes, Mr. Chairman, I would. I would just differ 

a little bit with Ms. Trossevin’s comparison of CBP to law enforcement, because, if law enforcement was as unsuccessful in stopping 

crime as CBP is, then every member of this Congress would get 

mugged every day when they walk out. It is a totally different 

level, so we do need responsible, timely information. I agree completely with you, Mr. Chairman. 

Senator WYDEN. Let us see if we can find some common ground 

in three areas, and you all are going to get to camp out with our 

staffs and all the interested Senators. Now that we have documented there are lots of Democrats and lots of Republicans, let us 

just see if we can get this panel out the door with some common 

ground for moving ahead. 

You, Ms. Trossevin. Do you agree that legitimate allegations of 

evasion ought to be quickly pursued and investigated? 

Ms. TROSSEVIN. RILA members definitely agree that legitimate 

allegations should be pursued and investigated. The only thing I 

would take care about is, when you talk about quickly, to be sure 

that what you are talking about really are reasonable timelines. 

Senator WYDEN. That will be the next question. 

Ms. TROSSEVIN. Well, all right. 

Senator WYDEN. Can I say you have said ‘‘quickly’’? 

Ms. TROSSEVIN. Pursuing fraud is an important thing, and we 

would always support pursuing legitimate allegations of fraud. 

Senator WYDEN. That is helpful. 

For both of you: should Congress hold Customs accountable to 

concluding investigations in a reasonable period of time? Mr. 

Schagrin, Ms. Trossevin? 

Mr. SCHAGRIN. Yes, Congress should. 

Senator WYDEN. Ms. Trossevin? 

28 

Ms. TROSSEVIN. I do believe that good government does require 

accountability, so I think a reasonable period of time. I think it is 

important, obviously, to have Customs involved in that conversation. I would note that an AD/CVD investigation, for example, 

takes about 12 to 18 months, and a circumvention proceeding takes 

at least a year or so typically as well. So that is perhaps something 

to look at. But then Customs, as I said, faces some other challenges. So, reasonable, yes. 

Senator WYDEN. I am going to put you down for ‘‘accountable’’ 

and ‘‘reasonable.’’ 

Ms. TROSSEVIN. All right. 

Senator WYDEN. Probably sounds like a law firm: Accountable 

and Reasonable, Attorneys at Law. 

One last point. With respect to an investigation into evasion, for 

the two of you, would it be helpful to provide notification to the 

public so that importers can then check into their supply chain, the 

domestic producers can offer their assistance, people see the administration as responsive? Would it be helpful, when CBP initiates an investigation, that there is notice to the public? Mr. 

Schagrin? 

Mr. SCHAGRIN. Yes, Mr. Chairman, I believe it would be helpful 

for CBP to give that kind of notice to the import and domestic community. 

Senator WYDEN. Ms. Trossevin? 

Ms. TROSSEVIN. We believe that notification to the importing 

community is helpful. I do not know whether doing it at the time 

of initiation of investigation would be the time, but we have often 

promoted the idea of giving more public access to importers to various lists of people who have been found to violate the law, yes. 

Senator WYDEN. I would hope that we could do it right at the 

get-go, because I have lots of importers too, as you know. Oregon 

is a very trade-sensitive area. That just means that importers can 

start jump-starting the process, getting to their supply chain, and 

all the issues that you all deal with all the time. So I am going to 

operate under the assumption that we have at least the two of you 

willing to talk to us about those three areas. Now we have to get 

into the details. The entire panel has been very helpful. If any of 

our witnesses has a last word, we can do it. Also, Senator Thune. 

Senator THUNE. Could I just ask one last question—— 

Senator WYDEN. Sure. 

Senator THUNE [continuing]. Because it was referenced earlier. I 

would be interested in knowing the views of the panel with regard 

to this issue of prospective assessment, because the GAO has repeatedly recommended that Congress consider switching to that 

prospective assessment system. I am wondering if you think that 

would effectively address the problem of uncollected duties. 

Mr. GLASSMAN. Senator Thune, if I can offer an opinion. Our perspective is that all a prospective system does is facilitate evasion 

and eventual fraud. There is no accountability. There is no ability 

to go back and true up with those importers. It is very simple to 

get a zero duty rate, to live under that rate. And, as was the point 

of the earlier testimony, the importers of record changed frequently. These are people who are trying to evade the laws of this 

29 

country. To not be able to retrospectively force a true-up of those 

duties is illogical and ill-founded. 

Senator THUNE. All right. 

Ms. Trossevin? 

Ms. TROSSEVIN. Well, I hope I could offer Mr. Glassman some 

good news, because the type of prospective system that RILA and 

a coalition of other importers and domestic manufacturers have 

been advocating is what we call a prospective normal value system. 

It would do exactly the opposite, do exactly what Mr. Glassman 

wants. We are not talking about a system where you give somebody 

an ad valorem rate, and then you go and say, thank you very 

much, go home, and we will see you in 5 years. 

What we are talking about is a system where Commerce does 

what it does every time and conducts an investigation or review, 

which is to determine what the normal value or the fair value of 

the good is. What you do, in a prospective normal value system, 

Customs uses that fair value and compares the entered value to 

that every time the goods cross the border. 

If that import is below fair value, those duties are collected immediately on the spot. There is no opportunity to disappear before 

somebody comes back 3 years later. You pay, cash on the barrel 

head. So, if you are an exporter, and you go in and you get a review, and Commerce says your normal value, your fair value, is 

$10 because that is what you have been bringing in, if you suddenly drop it to $2, we are not going to find that out 3 years later 

or come after you 4 years later. If you drop it to $2, the very day 

you drop it to $2, you bring those goods in, you are going to pay 

$8 cash to Customs right then. 

I think that collecting up front and also eliminating these huge 

retroactive rate increases that a lot of times face legitimate American businesses and put them out of work, that also reduces the incentive to evasion. That retrospective element, that unpredictability, is one of the incentives for people to evade the AD/CVD orders. You greatly reduce that incentive, I think, in a prospective 

system. 

Mr. GLASSMAN. Senator Thune, I would offer, that is a perfect 

world scenario. What happens to transshippers? They are lost in 

the process. That is the issue. That is the issue that this subcommittee is dealing with, illegal evasion of duties through transshipment. 

Mr. SCHAGRIN. Senator Thune, first, I think it is just critical for 

this committee not to fall into the trap of conflating the issue of 

duty evasion with the type of antidumping system we have. In Europe, they do have a prospective system versus our retrospective. 

They have as many problems with duty evasion as we do. Duty 

evasion will occur regardless of the type of system because these 

folks are not even telling CBP that these goods are country of origin China and that duties should be assessed. 

So this issue of prospective or retrospective is a very, very big 

issue, but has, I can assure you, absolutely nothing to do with the 

issue of duty evasion or the collection of the appropriate amount 

of duties. I was very troubled to hear Ms. Trossevin say that the 

possibility that duties might be increased under our retrospective 

system incentivized people for duty evasion. There is no possible 

30 

justifiable incentive for breaking the law. If you do not like a system, you try to have the laws changed; you do not evade the system. So, that is very, very troublesome. 

I would like our retrospective system, which has been in effect 

since 1930, to be the system which gives you the most precise 

entry-by-entry assessment of the amount of dumping of that entry. 

But there are other systems in the world. It probably merits study. 

It would be a massive overhaul of our trade law, so it is nothing 

that could be treated lightly. 

But I would greatly encourage the Senate Finance Committee to 

not in any way slow your efforts to solve the massive problem of 

duty evasion by considering this massive overhaul of our trade law 

system, and instead to focus now on duty evasion and leave these 

other issues for another time in the future and for further study. 

Senator WYDEN. A good one to wrap this panel up on. I can tell 

you, Mr. Schagrin, there is not going to be anything that is going 

to slow the efforts to try to come up with a solution here. To have 

you and the other businesses talking about this kind of job loss, 

talking about this kind of revenue loss to the taxpayers of the 

country, is just unacceptable. 

So what I need all of you to do—and particularly you, Mr. Schagrin, and you, Ms. Trossevin—is to get with our committee staff in 

the next week or so. Is that acceptable to you, Ms. Trossevin, so 

we can get you all working on the details and working with interested Senators? And you, Mr. Schagrin. Can we get you all together with the staff and interested Senators so we can do what 

was just raised at the end of this, and that is to move quickly? We 

have a problem here, and doing business as usual is not acceptable. 

So can we get started in the next week, Ms. Trossevin? 

Ms. TROSSEVIN. We will certainly do everything we can to help 

out in that area. 

Senator WYDEN. Very good. Mr. Schagrin? 

Mr. SCHAGRIN. You have my complete commitment, Mr. Chairman. 

Senator WYDEN. Very good. 

Mr. SCHAGRIN. Anything it takes. 

Senator WYDEN. Thank you to all of you. We will excuse you at 

this time. 

Our next panel will be Mr. Allen Gina, Assistant Commissioner 

of International Trade; Mr. J. Scott Ballman; and Mr. Ronald 

Lorentzen. Mr. Gina is Assistant Commissioner of International 

Trade at Customs. Mr. Ballman is Deputy Assistant Director of 

Homeland Security, U.S. Immigration and Customs Enforcement. 

And Mr. Lorentzen is Deputy Assistant Secretary for Import Administration. 

We welcome all of you this afternoon. We are going to make your 

prepared remarks a part of the hearing record in their entirety and 

then we will have some time for questions. 

Mr. Gina? 

31 

STATEMENT OF ALLEN GINA, ASSISTANT COMMISSIONER OF 

INTERNATIONAL TRADE, CUSTOMS AND BORDER PROTECTION, WASHINGTON, DC 

Mr. GINA. Good afternoon, sir. Chairman Wyden, Ranking Member Thune, it is an honor to appear before you today to discuss U.S. 

Customs and Border Protection’s responsibility to prevent and detect the evasion of antidumping and countervailing duties on imported goods. 

As stated, my name is Al Gina. I am the Assistant Commissioner 

for the Office of International Trade. While new to the position, I 

have been with CBP and the legacy Customs Service for 29 years. 

The detection of antidumping and countervailing duty evasion is 

a significant challenge, and, while we have had some successes, we 

realize that CBP needs to improve on our strategies to identify 

those who employ various methods to circumvent enforcement of 

those orders. 

To address this threat, 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 and audits to further assess risk and determine if additional corrective enforcement actions should be 

taken. 

To track the valuable information about the potential evasion 

that the private sector shares with us, we did establish CBP’s eAllegations online referral system in June of 2008. We take each 

claim seriously, and we have researched 4,000 commercial allegations, of which nearly 10 percent are antidumping and countervailing duty-related. We understand that U.S. industry wants more 

insight into CBP’s enforcement efforts, and to that end we would 

like to work with Congress to review its trade secrets statute to 

find ways that will allow us to release information to petitioners 

and therefore make our process more transparent. 

Your study, Senator Wyden, showed that there are many producers and middlemen ready to collude in using multiple techniques, often together in complex schemes, to evade antidumping 

and countervailing duties. As noted, those tactics do include illegal 

transshipment, under-valuation, failure to declare, failure to manifest, misclassification, and other techniques such as employing 

shell companies as primary means of avoiding payment, or the use 

of foreign businesses outside the reach of CBP authorities. 

To combat these schemes, CBP works with the private sector and 

ICE by initiating enforcement operations. In the last 2 years, 10 

antidumping and countervailing duty-focused operations have been 

conducted, resulting in successful cases on steel wire hangers, citric 

acid, honey, furniture, tissue paper, lumber, catfish, and frozen 

shrimp. 

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 the Department of Commerce, ICE, GAO, industry, and this committee to 

identify the most productive ways to deter dumping evasion. 

32 

I would like to highlight some of the approaches we are considering. As stated earlier, CBP needs to find ways in which we can 

enhance our information sharing with the private industry. Based 

on lessons learned with previous enhanced bonding requirements 

targeted at antidumping and countervailing duty risks, we will increase the use of single transaction bonds as a condition of release 

of goods when we suspect a risk to revenue. We will pursue regulatory and statutory changes to address the risk of non-payment or 

evasion posed by non-resident importers of record. 

To trace the origin of goods imported using false documents, we 

need better information and verification of production capabilities 

and potential transshipment countries. We are discussing with our 

colleagues how to secure new authority to conduct site visits in cooperation with host countries. We are working also with the Department of Commerce on the exchange of information that will 

help us verify the legitimacy of goods and, as mentioned previously, 

to tighten the new shipper requirements which we pose as a potential risk. 

We are in discussion with the Department of Justice to develop 

a task force to concentrate resources on the most complex criminal 

and civil cases, just as we have done with ICE and others on intellectual property rights. Mr. Chairman, thank you again for this opportunity to testify. I look forward to working with each of you and 

the rest of your committee to address these issues, and I would be 

happy to answer your questions. Thank you. 

Senator WYDEN. Thank you, Mr. Gina. 

[The prepared statement of Mr. Gina appears in the appendix.] 

Senator WYDEN. Mr. Ballman? 

STATEMENT OF J. SCOTT BALLMAN, DEPUTY ASSISTANT DIRECTOR, HOMELAND SECURITY INVESTIGATIONS, IMMIGRATION AND CUSTOMS ENFORCEMENT, DEPARTMENT OF 

HOMELAND SECURITY, WASHINGTON, DC 

Mr. BALLMAN. Thank you, Chairman Wyden, Ranking Member 

Thune, 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, Homeland Security Investigations to combat illegal trade practices and investigate commercial fraud activities, including the evasion of antidumping and 

countervailing duties. 

As members of the subcommittee know, globalization provides 

boundless opportunities for commerce, but with these opportunities 

come new potential threats to national security. The Department 

of Homeland Security is committed to ensuring the security of 

America’s borders against threats while fostering and facilitating 

the movement of legitimate trade across our borders that is critical 

to our economy. 

ICE has a long history of engagement in commercial fraud enforcement, particularly antidumping and countervailing duties, 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. 

33 

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. The ICE HSI commercial 

fraud priorities are: (1) protect the health and safety of consumers, 

government workers, and our war fighters from hazardous, tainted, 

substandard, and counterfeit imported products; (2) protect U.S. 

businesses from unfair trade practices; and (3) protect the revenue 

of the Federal Government. 

Our antidumping and countervailing duties 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. Antidumping 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 special 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 by either CBP or private 

industry. ICE agents research, identify, and obtain entry documents for all the alleged violators’ 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 local U.S. attorneys’ offices. 

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 the Department 

of Commerce, 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 Department of Commerce 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, under-valuation, over-valuation, 

or mis-description. This process normally involves coordination between several U.S. and foreign government agencies. 

Since 2006, ICE has initiated 391 cases based on allegations of 

fraud regarding antidumping and countervailing duty 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 invested a wide range of commodities, including honey, saccharin, citric acid, lined paper products, 

pasta, polyurethane bags, shrimp, catfish, crayfish, garlic, steel, 

magnesium, pencils, wooden bedroom furniture, wire clothing 

hangers, ball bearings, and nails. 

34 

I would now like to provide a few examples of significant dumping investigations. In February of 2008, ICE’s Special Agent in 

Charge office in Chicago and the Food and Drug Administration, 

Office of Criminal Investigation, began investigating Alfred L. 

Wolff, Inc., for the transshipment of Chinese honey to evade paying 

221-percent antidumping duties. 

Yong Xiang Yan, a Chinese manufacturer of honey, and the 

president and chairman of the board of Changge City Jixiang Bee 

Product Company, Ltd., 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 under-valuation. 

In addition, five individuals have been arrested, two of whom 

have plead 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 antidumping 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 8 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 plead 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. 

ICE SAC San Diego investigated Arturo Huizar-Velazquez, a citizen of Mexico, for circumventing antidumping duties on Chinese 

metal hangers. The metal hangers were shipped from China 

through the port of Long Beach, CA to Mexico, where they were relabeled as a product of Mexico and then imported into 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, the shipment was presented for export into Mexico at the Otay Mesa port 

of entry. On March 19, the March shipment was represented for 

entry into the United States. On March 20, the shipment was examined, the invisible ink was observed, and it was noted that the 

majority of the cartons were the same as seen on March 9 in Long 

Beach. Additionally, all the cartons in the shipment were now 

35 

stamped ‘‘Made in Mexico,’’ which was not the case during the export 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 plead guilty to one count 

of conspiracy and Huizar-Velazquez plead guilty to conspiracy, 

entry of goods by false statements, wire fraud, and money laundering. Both individuals are scheduled to be sentenced on May 16 

of this year. 

It is important to note that ICE’s criminal investigations are the 

last line of defense against the evasion of antidumping and countervailing duties. 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 effective deterrent factor and protect U.S. business interests—— 

Senator WYDEN. Mr. Ballman, we are going to have to break you 

off pretty soon. You are over the time. 

Mr. BALLMAN. I am almost finished. 

Senator WYDEN. That would be great. 

Mr. BALLMAN. All right. I am almost finished. 

To act as a more deterrent factor and protect U.S. business interests in the global economy, the U.S. Government must increase its 

efforts to educate the public and foreign industry about the penalties and consequences for evading antidumping duties through 

our successful investigations and enforcement actions. 

Thank you once again. I would be happy to answer any questions. 

Senator WYDEN. Thank you very much. We will have questions 

in a moment. 

[The prepared statement of Mr. Ballman appears in the appendix.] 

Senator WYDEN. Mr. Lorentzen? 

STATEMENT OF RONALD LORENTZEN, DEPUTY ASSISTANT 

SECRETARY FOR IMPORT ADMINISTRATION, DEPARTMENT 

OF COMMERCE, WASHINGTON, DC 

Mr. LORENTZEN. Thank you, Chairman Wyden and Ranking 

Member Thune, for inviting me to discuss the evasion of U.S. antidumping and countervailing duty orders. This is an increasingly 

troubling phenomenon, and I appreciate your convening this hearing, your interest in the problem, and providing me the opportunity 

to discuss my agency’s efforts to address the challenges. 

As the Deputy Assistant Secretary for Import Administration, it 

is my responsibility to administer the antidumping and countervailing duty laws which are designed to counter unfair trade practices that cause injury to American industrial manufacturers and 

agricultural producers. 

In the late 1980s, Congress gave Commerce certain authority to 

deal with potential circumvention of these duties. Moreover, as a 

matter of our daily business, we work closely with our partners at 

36 

CBP and ICE to try to counter and thwart various duty evasion 

schemes. Commerce conducts AD/CVD investigations and reviews 

to determine whether imported merchandise is dumped or sold at 

less than normal value, or if it is subsidized by foreign governments. 

If our investigation finds that imports have been dumped or unfairly subsidized, and, if the International Trade Commission finds 

that the domestic industry has been injured as a result of the unfairly traded imports, we issue an antidumping or countervailing 

duty order. 

When that happens, we instruct CBP to require importers to pay 

cash deposits whenever they import merchandise subject to that 

order. Thereafter, on an annual basis and upon request by an interested party, we will conduct an administrative review of the entries from the past year to determine the actual level of dumping 

or subsidization during that period. 

Our role in identifying and counteracting circumvention is addressed in section 781 of the Tariff Act of 1930, as amended. Pursuant to those provisions, Commerce may conduct circumvention inquiries when it is alleged that minor alterations have been made 

to subject merchandise, 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 countries subject to the order, and Commerce can also find under these 

provisions that later-developed merchandise may be included within the scope of an existing order. 

If it is determined that an order is being circumvented, Commerce may, after consulting ITC, direct CBP to suspend liquidations of the entries and require a cash deposit of estimated duties 

on all unliquidated merchandise determined to be circumventing 

the order. 

Today we are currently investigating seven allegations of circumvention involving such products as wire hangers, laminated 

woven sacks, small-diameter graphite electrodes, glycine, tissue 

paper, and cut-to-length carbon steel plate, all concerning orders on 

Chinese merchandise, as well as ferro-vanadium from Russia. A 

more detailed description of these inquiries is outlined in my written testimony. 

In addition to the authority specifically prescribed to us by the 

statute, we work in close cooperation with DHS and the Department of Justice to assist them in enforcing the Customs laws and 

ensuring that our border measures are as effective as possible. 

In 2006, we established a Customs unit that reports directly to 

our Deputy Assistant Secretary for AD/CVD Operations. This staff 

meets regularly with personnel from CBP and ICE to discuss enforcement issues, share information, and coordinate our interaction 

to address potential fraud and evasion. 

In February of last year, the AD/CVD portion of CBP’s new commercial trade tracking system, the Automated Commercial Environment, or ACE, went live for entries of merchandise subject to 

AD and CVD orders. ACE allows us to maintain much more efficient communication with CBP and the implementation and application of the duty rates. For example, ACE permits the application 

37 

of AD/CVD rates on a per-unit basis as an alternative to the typical 

ad valorem rates. 

The application of a per-unit duty is important to counter situations where companies regularly understate the value of their imported merchandise. We have since opted to apply per-unit rates in 

several antidumping cases, including crawfish, honey, activated 

carbon, and garlic from China, as well as fish fillets from Vietnam. 

In the course of our proceedings, particularly our annual reviews, 

our staff occasionally comes across information indicating the possible evasion of AD/CVD duties, and Commerce has also encountered situations in which foreign manufacturers have presented us 

with false documents during the course of an AD/CVD case. In response to such behavior, we recently amended our regulation governing the certification of factual information submitted to Commerce in an AD/CVD proceeding. 

The amendments will strengthen the current certification requirements by mandating that the party submitting the documents 

identify in a specific fashion the documents, time period, party, and 

date to which the certification applies. These new requirements 

will better ensure that parties and their counsel can be legally held 

responsible for the authenticity of specific documents and are 

aware of the consequences of certifying false documents. 

When we uncover information that indicates possible evasion of 

the laws, we have the statutory authority to provide that information to DHS. Once a fraud or evasion investigation involving an 

antidumping or CVD case is initiated by ICE, Commerce is frequently asked by either CBP or ICE agents, or the U.S. Attorney 

conducting the investigation, to provide assistance. 

For example, during separate fraud investigations of steel wire 

hangers and honey from China, our analysts assisted the U.S. Attorney in these cases by providing extensive information and explanation about the results and nature of our own investigative processes. Cooperation among Commerce, DHS, and Justice has resulted in a number of indictments, convictions, and prison sentences for the evaders of AD/CVD orders. 

My written testimony details several examples of cooperation 

among our agencies that has been critical to the enforcement of the 

law and responsible for the administration of due punishment to 

those who attempt to evade our orders. 

Commerce is committed to the strict enforcement of unfair trade 

laws, and we will continue to work closely with our partner agencies to combat evasion. I thank you for providing me the opportunity to speak to you today, and I am happy to answer any questions. 

Senator WYDEN. Mr. Lorentzen, thank you. 

[The prepared statement of Mr. Lorentzen appears in the appendix.] 

Senator WYDEN. Senator Thune, I think, has the more challenging schedule at this point, and I am going to let him start with 

his questions. 

Senator THUNE. Thank you, Mr. Chairman. Again, I appreciate 

very much your gracious effort here to allow me to get these questions in before I have to catch a flight, and I appreciate your leadership on this issue. I think this has been very enlightening, and 

38 

I think will be very helpful as we move forward with, as I said earlier, some proposed solutions. 

I want to just, if I could, get at a couple of issues here. I want 

to direct these, at least initially, to Mr. Gina from Customs and 

Border Protection. I am interested in knowing what efforts Customs has been making to engage foreign governments that engage 

in transshipment of Chinese honey to prevent further Customs 

fraud and circumvention, and secondly, what efforts are being 

made with the Chinese government and Chinese officials to prevent 

Chinese producers and exporters from engaging in the transshipment of honey and other merchandise. So, what are we doing 

to prevent the Malaysias and the Indias and the Indonesias from 

allowing this to happen, and secondly, what are we doing with regard to the Chinese officials? 

Mr. GINA. Yes. Well, we have approximately 70 Customs Mutual 

Assistance Agreements, so when appropriate we attempt to utilize 

those as far as receiving information and the possible welcoming of 

teams to do verifications. As we have found—and I think it would 

be very honest and candid—with our Customs–Trade Partnership 

Against Terrorism attempt to do validations in China, it has been 

very challenging to get the country clearance from the Chinese government to enter in. 

We have also engaged CBP, which represents the U.S. Government at the World Customs Organization. It has 177 country members, and we have raised through that forum some of these challenges concerning transshipment. The World Customs Organization 

has put out a compendium. They are a non-standard setting organization, but they put out a compendium offering recommendations. 

I think as debated this morning—just a note as to whether you 

can police the system and whether the system allows for policing. 

One of the challenges that gets raised in the World Customs Organization is that we are the only country in the world with a retrospective system. We have tried through those mechanisms, and we 

have also, in one last area, reached out to the U.S. Trade Representative to possibly see if it would be feasible to have trade 

agreements that would allow for us to have jump teams that can 

go in to check on production capacity, and that was done. The example where that was successful was in the textile environment. 

Thank you. 

Senator THUNE. It strikes me that that is kind of your job, to be 

the police force, right? I guess what I hear you saying is that in 

order to really put pressure on some of these foreign governments, 

and particularly in this case with honey with China, that you need 

more authority to do that. Is that what I heard you saying? 

Mr. GINA. I would think that would be a fair assessment, sir. I 

think most of the challenges we have, most of the duties that go 

uncollected, are on individuals outside of, at least, Customs’ authority. A lot of it is on foreign importers, because our statutes and 

requirements just allow for having a mailing address to be construed as an importer, so, when subsequent action needs to be 

taken, there is nobody here in the United States in order to actually go against legally. 

39 

Senator THUNE. I would think that what you suggested—and 

this is something we should do, too, Mr. Chairman, I would think, 

engaging USTR in this. I assume that they have been, on some 

level. 

Mr. GINA. Yes. 

Senator THUNE. But certainly it sounds like that needs to be 

stepped up as part of the response. 

How do you decide what specific merchandise or what policy interests are given priority in enforcement? 

Mr. GINA. Well, as stated earlier, from two perspectives. One, in 

doing an analysis, I think it was alluded to, 85 percent of all of the 

concerns, especially in uncollected duties, are from 5 particular 

commodities, and they all come from China. It is crawfish, fresh 

garlic, honey, mushrooms, and wooden bedroom furniture. Of the 

uncollected duties over the last 5 years, which amount to approximately $1 billion, those five from that country account for about 

$878 million. 

We also do get the e-Allegations that we receive from the private 

industry. I will admit that we need to do better and work through 

the privacy laws and disclosure laws to see how we can provide information to the trade. As indicated, since the system was established, we have gotten 337 allegations that were relative to antidumping and countervailing duties. 

Senator THUNE. Let me ask, if I might, Mr. Lorentzen, in the existing AD order on Chinese honey, anything less than 50 percent 

honey is not subject to duty. As Mr. Adee’s testimony indicated, one 

major scheme has been mislabeling drums of honey as blends to 

evade the duty. Does the Department of Commerce have the authority to revise its order to better prevent that? 

Mr. LORENTZEN. Well, I believe that that would be a question of 

evasion of the duty as opposed to—you have correctly described the 

scope of the order. I personally met on a number of occasions with 

folks from the domestic honey industry to describe what their options are under our anti-circumvention law, and then to the best 

of my ability to describe what I understood their alternatives would 

be with respect to transshipment or evasion questions where they 

could seek recourse with our friends at DHS. 

Senator THUNE. If the 50-percent provision cannot be eliminated, 

does the Department have the authority to impose a duty at least 

on the percentage of honey that is included in the ‘‘blend?’’ 

Mr. LORENTZEN. Well, the way our orders are structured, the 

written description of the product is what holds. That written description of the product is then used by a Customs specialist to determine what is dutiable. So we set the scope of the order at the 

outset of the case. It is not something that we can change later in 

time, unless there is an anti-circumvention issue. 

Senator THUNE. Is there a way of knowing whether a drum of 

blended honey is actually a blend or pure honey labeled as a blend? 

Mr. LORENTZEN. That is not a question that I am technically able 

to answer. Sorry. 

Senator THUNE. All right. 

One last question. I guess this is for Mr. Gina, maybe. That is, 

would a national standard of identity and field test assist in determining whether a product is pure honey or blended honey? 

40 

Mr. GINA. In answer to the question, can it be determined, yes. 

We have a laboratory and scientific services, and we have mobile 

labs, as well as stationary labs. It would have to be done through 

forensics by a chemist. So it can be done. The challenge is always 

to target certain shipments rather than impose that type of requirement on every single importation. 

So there would be, hopefully, some type of indication that detaining a particular shipment would be warranted, and detaining it in 

enough time in order for the laboratory to do the testing. That, I 

guess, as mentioned in earlier panels, is that appropriate balance 

of ensuring that whatever is required for some does not get imposed on legitimate importers as well. 

Senator THUNE. All right. Thank you. I appreciate, again, your 

testimony. Thank you, Mr. Chairman. 

Senator WYDEN. Thank you, Senator Thune. We are going to 

work very closely on it. 

I just want this panel to understand, what I am most troubled 

by is the complete lack of urgency that I am seeing in your presentation. I mean, what we have heard from the witnesses today, what 

we picked up in our investigation, is that the investigations are too 

slow. We are not protecting taxpayer revenue because we are not 

in a position where you can ensure that duties can be collected 

quickly, and we are not protecting American jobs at a time of high 

unemployment. 

So I am going to walk you now through some questions that deal 

with these issues. I mean, you made the point, Mr. Gina, with respect to these five commodities, when Customs has authority to collect duties in cash where you suspect evasion and you all do not 

use that authority—I know there are questions about due process 

and the like—but that is what we have to get corrected. We have 

to stay at this until we fix the system that in my view is broken. 

So let me just go through some questions and try to elicit your 

answers so that we can use that as a foundation for some reforms. 

The first is, we heard from Mr. Glassman, we are talking about 

substantial sums of money, I mean, even at one company. My first 

question to you is, if the Congress takes legislative and other steps 

to reduce the evasion of antidumping and countervailing duties, 

would you not agree that the result could well be we could make 

a difference in cutting the deficit? 

Mr. GINA. The quick answer is yes, sir. I think it would make 

a substantial difference in how we collected money. I would note 

that, relative to the amounts of money that get collected—if I may 

introduce, it is approximately $310 million per year requested of us 

for cash deposits. That is relative to the $3.2 billion that we collect 

in duty. Of the import value for antidumping and countervailing 

duty, it is approximately, per year, $5.4 billion relative to the $1.9 

trillion of imported merchandise. 

Senator WYDEN. Let us talk about, of the duties assessed or identified, how much Customs has actually collected. My understanding 

is, for fiscal year 2010, collection rates from penalties assessed are 

about 1.5 percent. Is that right? 

Mr. GINA. I would have to check on the exact percentage, but I 

would agree with you, sir, that it is extremely low. 

Senator WYDEN. Well, you go do some checking. 

41 

Mr. GINA. All right. 

Senator WYDEN. Because we got that from your agency. So you 

do not know, for example, what your agency is furnishing the staff? 

Mr. GINA. Well, I would have to get back to you on this as part 

of the official record with the exact percentage. But I would share 

with you, sir, as I mentioned during my testimony, most of the people whom we are trying to collect those unpaid duties from are either outside of our reach or importers that are located in foreign 

locations. 

Senator WYDEN. Well, your staff told us that the collection rates 

from penalties assessed are about 1.5 percent. So, if you want to 

contradict them, you get back to us, and we will be interested in 

that. 

On this issue with respect to how long it takes to develop a 

criminal fraud case, is it fair to say—and this would be for you, Mr. 

Gina, and you, Mr. Ballman—that several years might be a common amount of time on a criminal case? 

Mr. GINA. From our perspective, the time that we contribute to 

it, I would say several years would be appropriate, sir. 

Senator WYDEN. Did you want to add anything to that, Mr. 

Ballman? 

Mr. BALLMAN. Senator, one of those cases that I mentioned was 

the San Diego case. That one was the best case you could ever see. 

I mean, we did not have to go to a foreign government to obtain 

documents. The merchandise passed through the United States. 

We were able to mark it when it came back, and that case took 

over a year. So, yes, they do take—— 

Senator WYDEN. Given the fact we all agree that it takes more 

time to bring a criminal case, why not just move more quickly and 

assess the duties on the civil side and protect the taxpayer? Mr. 

Gina? 

Mr. GINA. Well, I would welcome working with this committee on 

how to do that. I think what we have demonstrated and what Commissioner Bersin has challenged us with is doing exactly as you 

say, Senator, but also doing it within the rules, regulations, and 

the laws that allow us to do it. 

Senator WYDEN. Here is my understanding of what Mr. Bersin 

thinks of all this that you all think works so well. It is my understanding that at a September 22, 2010 meeting, an important 

meeting of manufacturers—National Association of Manufacturers 

Customs and Border Coalition—the Commissioner was asked about 

antidumping and countervailing duty enforcement issues, and he 

described the current state of enforcement as incomprehensible and 

disgraceful. He said the problem is not a lack of resources, but the 

structure of the enforcement scheme. Are you aware of that, Mr. 

Gina? 

Mr. GINA. I am, sir. 

Senator WYDEN. You are aware that that is how the Commissioner characterized it? 

Mr. GINA. I am aware that, if that was the Commissioner’s 

quote, that I was aware that he made that statement. 

Senator WYDEN. All right. Well, what has, then, been done to 

change the enforcement scheme to make it better, given the fact 

that the Commissioner says it is disgraceful? I mean, you all have 

42 

come and you have given your testimony. I have told you, I do not 

see any urgency with any of you about changing it. Now Mr. 

Gina—and essentially he is aware that Mr. Bersin says everything 

is disgraceful, but we are sort of going to go along about our business and kind of read each other some anecdotes and the like. So 

what has been done to change this enforcement scheme that Commissioner Bersin says is a disgrace? 

Mr. GINA. Well, I think if I go back to what I alluded to in my 

oral statement, sir, we are trying to re-look at how we can apply 

bonds. I think, as you may be aware, sir, we attempted to use continuous bonds and were overruled by the World Trade Organization 

and the Court of International Trade, so we are trying to be more 

creative in our application of single-entry bonds. We are trying to 

address the issues relative to loopholes that may be presented by 

non-resident importers. 

I think we stated—and I admit that we need to work with the 

trade and possibly try to figure out how we can be more robust in 

our information sharing. The attempt, as I mentioned, whether 

through the USTR or other means, to do site visits, as we had applied in textiles, our dialogue with our colleague agencies over the 

new shipper rule, and attempting, as we had done with IPR, to elevate to a task force the issues relative to antidumping and countervailing duty—— 

Senator WYDEN. I have to tell you, when somebody comes and 

tells me, just as you did just now, that you are interested in elevating something to a task force after these companies have said 

again and again and again that they come to you and they have 

to get some action, when somebody from the Federal Government, 

from an agency, says that they are really going to get serious about 

it, they are going to go after it now, why, they are going to elevate 

it to a task force, that does not sound to me like a whole lot is 

going to change. 

Now, I have heard from numerous industries that the current eAllegation system does not work because the domestic industry 

never receives any information back from Customs about the actions that are being taken. Do you agree that that is a problem 

that needs to be fixed? 

Mr. GINA. I think there is room for tremendous transparency 

that can be built into the system. I think we, as indicated, take 

every allegation seriously. Since 2008, there have been 337. I think 

we do have information showing the disposition of what we did. We 

are trying to work through to ensure that we can reveal that information, but also stay true to the privacy laws and any appropriate 

statutes. 

So of the ones that were taken—I know there was reference earlier—we do not close out an allegation by merely sending it to our 

field office. When it is sent to our field office, it is closed out after 

they take any appropriate action, such as requesting additional information through a CF–28 or any other steps that they take. If 

needed, I could supply that as part of the record, the matrix of the 

various actions taken on those 300 and something allegations, sir. 

Senator WYDEN. Now, another concern of industry is that the 

agency fails to publicize even successful convictions, so a lot of deterrent effect is lost as a consequence. Do you agree with that? 

43 

Mr. GINA. Yes, I do. 

Senator WYDEN. Is there anything going to be done to change 

that? Do you have any plans to do it? I mean, even in areas where 

you say you agree, I am not clear anything is going to be done to 

change it. So what is going to happen there that is going to be different? 

Mr. GINA. Well, we have gone to our counsel and asked them, 

what can we do within the legalities of the laws in ensuring that 

we publicize those cases that are absolutely closed that would not 

compromise any type of investigation, and we will be taking steps 

forward to do that, sir. 

Senator WYDEN. When is that going to start? 

Mr. GINA. I would imagine it could be done within a month or 

two, sir. 

Senator WYDEN. So in a month or two, that actually sounds like 

something might happen. In a month or two, you are going to start 

a new effort to publicize a successful conviction so we might start 

ending up with a little bit of a deterrent effect. This is on the level. 

We are not going to have another task force? 

Mr. GINA. It is on the level, sir. 

Senator WYDEN. All right. 

Now, you say in your testimony our most valuable partner in 

antidumping and countervailing duty enforcement is U.S. industry. 

Given that statement, would Customs support giving the domestic 

industry the ability to file petitions alleging specific instances of 

duty evasion and circumvention, and then of course require an investigation into those practices if it was warranted? 

Mr. GINA. Not having a legal background, sir, I would think it 

would be fair for me to respond to that and say, if it would help 

the process and make us more effective, I agree. I would only add 

that due process would have to be ensured. Having been in Customs and legacy Customs Service for 29 years, I know there are numerous instances of poison pen allegations, people just making allegations against their competitors, which would cause Customs to 

perform examinations, slow down shipments, or anything that 

could possibly do harm to legitimate competition. So I would just 

make a statement that due process would have to be ensured in 

any type of system. 

Senator WYDEN. Now, you state in your testimony that only a 

small minority of shipments are non-compliant with the antidumping and countervailing duty laws, and at the same time the 

subcommittee has heard again and again from all sorts of industries that the orders are being evaded and not enforced. What are 

you basing your statement on that we are talking only about a 

small minority here? 

Mr. GINA. The statement was based on, sir, we receive orders 

and then compare the subsequent collection of the duties. We have 

found statistically that 60 percent of the ultimate duty is what was 

assessed initially, 26 percent is where the U.S. Government provides a refund. It is that 14 percent where there is a significant 

increase to the amount of duty and/or revenue that needs to be collected. So, while I think we would say 14 percent is the small universe, but, as alluded to earlier, I think the significant amount of 

44 

duty that is collected is such that it leads to a large number of 

monies and duties that do not get collected. 

Senator WYDEN. Why don’t you let us see that information? I am 

going to have to unpack it. 

Mr. GINA. All right. 

Senator WYDEN. Let me come back to the comment I made earlier. Customs is only collecting 1 percent of the duties and penalties 

that are assessed for evasion, and that is not good enough. So, I 

want to look at that analysis that you have just mentioned. 

Let me turn to you now, if I could, Mr. Ballman. Over the last 

12 months, ICE has purposely seized about 100 domain names and 

accidentally seized tens of thousands more. 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 the antidumping and countervailing duty orders? 

Mr. BALLMAN. Senator, I would have to defer to CBP, which has 

people in the ports. They are the ones who usually do the seizures 

on the merchandise as it is imported. 

Senator WYDEN. Is ICE challenged for resources to enforce the 

trade laws? 

Mr. BALLMAN. We have, of course, 26 Special Agent in Charge offices, many satellite offices, as well as over 70 offices overseas. So 

we have people working commercial fraud in each one of those offices. Of course, in the overseas offices, they have to take care of 

all of our responsibilities, so their time is limited to what can be 

spent on commercial fraud. But we do have resources that are dedicated to this. 

Senator WYDEN. Has the International Trade Commission made 

a similar determination into whether the domain names that ICE 

seized caused specific injury to any of the movie studios? 

Mr. BALLMAN. Not that I am aware of. 

Senator WYDEN. You see, what concerns me is that we have companies here, American workers, proven harmed, taxpayers clearly 

being injured, and yet we are seeing an effort to look at possible 

harm to the movie sector. It just seems to me we are missing how 

important it is to get this right and to make sure that we are enforcing the laws with respect to our workers and our businesses. 

That is what I am going to continue to ask you about. 

Now, as you know, for several months I have raised concerns 

about ICE’s efforts to seize website domain names that allegedly 

facilitate the distribution of content that infringes on copyrights. I 

emphasize ‘‘allegedly’’ because these website operators have not 

had their day in court. ICE is seizing websites that many Internet 

experts say are operating legally. 

Now, I got the strong impression that ICE dedicates more resources towards seizing personal property over alleged wrongdoing 

than toward enforcing the trade laws that are proven necessary to 

spare domestic industry and tens of thousands of American workers from harm. 

So again, I want to come back to the question of priorities, and 

how are you all working together, you and CBP, to coordinate enforcement activities. Because we have to get this right. If American 

manufacturers look out and they are seeing these slow investigations, and—as we heard earlier—agencies that do not get back to 

45 

them at all, and yet the government is responsive to the movie industry, I do not think that is going to demonstrate, at a time of 

high unemployment in the country, that we are getting the job 

done on enforcement. So what can be done here between what you 

all do and what CBP does to coordinate enforcement activities so 

we can make a difference for these manufacturers? 

Mr. BALLMAN. Part of your question: we have only seized 120 domain names at the IPR center. Those were done after either 

downloading content or making multiple purchases and receiving 

both the downloaded and the other products and having confirmed 

that they were either pirated or that they are counterfeit items. So 

far, of the 120, 66 have already gone through the forfeiture process 

through the courts and have been forfeited to the government. 

CBP and ICE work hand in hand in commercial fraud. We have 

to. CBP is the first line at the ports. We work together through 

what we call the CER process, which is Commercial Enforcement 

and Response, where we have our agents, their import specialists, 

their officers, their port directors, their auditors, meet on a monthly basis in the port to go over all allegations that they have toward 

commercial fraud. 

In addition to that, we also have a headquarters CER process 

where, at the headquarters level, ICE meets with CBP, and we go 

over what is going on in the field, because we might have a bigger 

picture of what is going on. So, if something may have been declined for investigation or other activity out in the field, we see 

that it is a pattern of activity, and we can act on it. So, we work 

very closely with CBP. 

Senator WYDEN. What troubles me again is the question of priorities. I mean, we have had these American industries, these important American industries from all over the country, saying nobody 

pays any attention to them. Yet ICE is working very closely with 

the movie studios, hand in glove, as they move towards seizing 

websites for copyright infringement. Are you telling me that you 

spend as much time on basic American industries that have been 

telling me today that they are not getting the time of day from you 

all, are you telling me you are spending as much time and giving 

as much of a priority to them as you are to the movie studios? 

Mr. BALLMAN. Yes. As I stated in my testimony, we have done 

391 cases since 2006. We take allegations very seriously. We go 

through these allegations, and, if they meet prosecutorial thresholds, we open an investigation and go forward with them. 

Senator WYDEN. I can only tell you that the companies that I 

talk to say, across the board, that what we heard this afternoon— 

that they bring cases to you all, your two agencies in particular, 

and basically get no response—is light-years removed from the 

kind of efforts I see with movie studios, and press conferences 

about those kinds of operations. I just do not think the case you 

are making here today that these are priority issues bears up, and 

that is why we are having so many companies from across the 

country express their unhappiness. 

Let me turn to you now, Mr. Lorentzen. You mentioned the Department of Commerce is currently investigating seven allegations 

of circumvention. The sixth involved products from China. Circumvention certainly seems to be a problem that we are experiVerDate Nov 24 2008 17:26 May 30, 2012 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 R:\DOCS\74204.000 TIMD
46 

encing with them, and what we are looking at here does not even 

include the myriad number of evasion techniques that our investigators find. 

My sense is that China looks like the big challenge in the room. 

What more ought to be done to ensure that products from China 

do not continually circumvent and evade our trade laws? This is a 

question designed to see if part of this requires a more Chinacentric solution to try to get around. What is your sense about 

that? 

Mr. LORENTZEN. Well, I think, first of all that, as has become evident from the discussion today, the issue of circumvention is related to, but somewhat different from, the collection of issues having to do with evasion. As I indicated, we have six of seven of our 

ongoing cases that involve goods from China. I am a little bit reluctant to suggest that there ought to be a change that makes it 

China-focused, for the main reason that today it is China, tomorrow it may be Vietnam, it may be other countries, and we need to 

make sure that our tools are equally and effectively applicable 

across the board. 

So certainly, if there are specific issues relating to our commercial relations with China that are relevant to our anti-circumvention inquiries and are permissible for us to take account of, we will 

do that. As I indicated earlier, we try to share information as much 

as we can with our colleagues from DHS within the context of our 

own investigations. 

So China is one of our largest trading partners. Perhaps upwards 

of 35 to 40 percent of our caseload involves China, so it is an important concern today. But, if we were to envisage sort of statutory 

changes, I would want to make sure that they were equally applicable to all of our trading partners. 

Senator WYDEN. How does the enforcement mission that we are 

talking about here today relate to some of the other important aspects of our trade agenda, particularly, say, the export initiative? 

Mr. LORENTZEN. The National Export Initiative that the President announced, the Commerce Department was one of the agencies that developed some of the initial ideas for that. Early on, Secretary Locke was quite clear with me and with others in our agency that an important pillar of that initiative is to ensure that we 

have effective enforcement of our trade agreements and our trade 

laws. 

Last year, he sat down with me, and we went through a number 

of issues relating to our own administrative practice, and we put 

forward some proposals for regulatory and administrative change 

in order to tighten enforcement of the law. So in my mind, in order 

to be competitive globally, American industries need to be assured 

that they can compete on fair terms, and that is why enforcement 

of the laws and the agreements is an important component of the 

National Export Initiative. 

Senator WYDEN. Now, Mr. Lorentzen—and let me get you into 

this too, Mr. Gina—sometimes companies apply for the New Shipper status, the New Shipper category from the Department of Commerce. They get a favorable countervailing duty or antidumping 

margin, and then they go out and ship massively at an unfair 

price. That is what we are being told happens. 

47 

Do you all have an effort, between you at Commerce and you, 

Mr. Gina, to come up with a way to tackle this kind of issue? I 

mean, it would seem to me that you ought to be sharing information and doing something to stop this kind of activity. But describe 

what goes on between the two of you on this issue of New Shipper 

status that we end up getting fleeced on too. 

Mr. LORENTZEN. Well, I would say, speaking for my part, when 

we get requests for a New Shipper rate, we devote a lot of time and 

attention to, first of all, ascertaining whether or not it is a bona 

fide new shipper. We devote a lot of—— 

Senator WYDEN. Does Customs send you that information? 

Mr. LORENTZEN. Well, this would be information about the foreign exporters as opposed to the importer. 

Senator WYDEN. All right. It is in your ballpark. 

Mr. LORENTZEN. But the importer concerned that is involved in 

the transaction would also be on the domestic side. So I think, 

within the confines of our respective statutory authority, we share 

as much information as we can. It may well be that certain of the 

information that is subject to criminal proceedings, our colleagues 

at DHS would not be, at present, able to share that information. 

But I will defer to them to answer that question. 

Senator WYDEN. Mr. Gina? 

Mr. GINA. As alluded to, the information that we have with regard to importers, we do share with our colleagues from the Department of Commerce. I think the real challenge is, is the person 

who is presenting himself as a new shipper, is he falsifying that 

information? So, for example, if they are really Al Gina Imports 

and we have, in CBP, all of that history on their imports, but when 

they are presenting themselves as a new shipper, if they are presenting themselves as John Doe Importers, we need to work better 

on how we close that disconnect and that gap that exists. 

Senator WYDEN. Well, where I am going with this line of questioning is, both of you have been concerned about a host of these 

kinds of issues, the treatment of confidential business information, 

trade secrets, materials under prospective orders. Would Customs 

find it useful to have greater access to Commerce information during an investigation, again, to kind of speed things up in this area? 

Mr. GINA. Well, I think, as noted, Customs is not an investigatory agency. Our investigative arm is ICE. So in answering that 

question within those parameters, if the information is part of the 

investigation, if it can help us perform our role in this process better, we would welcome that opportunity. 

Senator WYDEN. Have you done an analysis of your authority to 

share information with partner agencies? Is that done? 

Mr. GINA. I would have to check. 

Senator WYDEN. But should you not know the answer to these 

questions? I mean, that is a pretty simple question: have you done 

an analysis about whether you have the authority to share information with partner agencies? 

Mr. GINA. I will have to check, sir. As I mentioned in my statement, I am new to this current position, even though I have been 

with CBP 29 years. That is no excuse, but, if I gave you an answer 

that was not factual—— 

Senator WYDEN. Fair enough. 

48 

Mr. GINA [continuing]. I think I would be at a loss of integrity. 

Mr. LORENTZEN. Mr. Chairman, if I could say—— 

Senator WYDEN. Sure. 

Mr. LORENTZEN. For our part, there is no statutory bar to us 

sharing information that we have with Customs. We share as extensively as we can. So I think we have an interest, and we have 

felt it is reciprocal, to exchange information experiences on the 

maximum level. 

Senator WYDEN. I will tell you, we have been at it, what, close 

to three hours at this point. I was concerned when I came with respect to what this process was doing to our country, both from the 

standpoints of credibility in the area of global commerce—I mean, 

we have major trade agreements coming up, three major trade 

agreements. 

I do not know how you go to the American people and credibly 

say that you want to go forward with new trade agreements when 

people are going to look at this transcript and they are going to 

say—they are going to look at the transcript of this hearing, folks 

who want to follow up on this, and they are going to say, the laws 

on the books are not being followed. They are only collecting 1.5 

percent of what they ought to be collecting. We have investigations 

that are too slow, taxpayers’ interests are getting short shrift. 

When we have this tremendous unemployment rate, we are seeing 

businesses saying they are losing employment in their sectors as a 

result of these kinds of abusive trade practices. 

I have seen virtually no urgency with respect to what is going 

to be done. In some areas, such as the ones that you and I talked 

about with respect to our industries, Mr. Ballman, I just wish you 

would give to the cause of basic manufacturing in this country the 

same visibility, the same priority that you give with respect to the 

movie studios and what is going on with respect to alleged copyright violations. 

So, I will let you all add anything further, but I want to assure 

you and assure your agencies I am going to stay at this until it 

changes, because there is a big gap between what you have said 

is going on and Commissioner Bersin saying that this enforcement 

situation is a disgrace. 

I do not hear that kind of comment from somebody who heads 

an agency very often, but you sure do not get that kind of message 

from the three of you, A, or B, that much is going to be done to 

correct it. So, if you all would like to add anything, we will let you 

have the last word. Otherwise, the subcommittee will be adjourned. 

Do any of you want to add anything else? Mr. Lorentzen? 

Mr. LORENTZEN. Let me just say, as I indicated at the beginning 

of my testimony, we agreed that this was a problem when we 

looked—— 

Senator WYDEN. I am sorry, Mr. Lorentzen. Excuse me. I just 

was trying to make sure Senators could get their statements in the 

record. Go ahead. I am sorry. 

Mr. LORENTZEN. All right. I just wanted to indicate that at the 

beginning of my remarks I agreed that this was a serious problem, 

and I welcomed this hearing and consideration that you are giving 

to the problem. 

49 

I come from a part of Ohio that Senator Brown referred to in 

terms of the northeastern part of the State, what is commonly referred to as the Rust Bowl now. My dad grew up in industry. Thirty years ago when I started at the Commerce Department, my first 

case was on Steel Wire Nails from Korea. So, I have lived through 

these problems. Speaking personally, I am here to tell you that Import Administration and the Commerce Department will work 

closely with you and with this committee to ensure that we have 

the most effective enforcement tools that we need. 

Senator WYDEN. Well, I thank you. With those Ohio roots, I hope 

you will get to the same kind of approaches that Senator Brown 

is advocating with respect to enforcing our trade laws. 

Mr. Ballman? 

Mr. BALLMAN. Yes, Senator. I just want to say that ICE is interested in protecting U.S. businesses, all U.S. businesses. We need to 

publicize more what we are doing with the antidumping cases so 

that everybody knows what is going on, just not what is going on 

with the movie industry, because we are doing the investigations, 

we are able to get indictments and put people in jail. 

Senator WYDEN. Mr. Gina? 

Mr. GINA. I would just like to thank you for the opportunity to 

be here, sir. I would like to just, on behalf of my colleagues at CBP, 

note that they do take it very seriously. My colleagues put their 

lives in harm’s way each and every day to protect the national security of the United States, and I would welcome the opportunity 

to work with you, the private industry, and others to correct this 

situation. 

Senator WYDEN. With that, the subcommittee is adjourned. 

[Whereupon, at 4:48 p.m., the hearing was concluded.] 

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