Customs and Border Protection: Improved Planning Needed to Strengthen Trade Enforcement
Released: 2017-06-12T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: In fiscal year 2015, CBP processed more than $2.4 trillion in imports through more than 300 ports of entry, collecting around $46 billion in revenue. CBP facilitates legitimate trade coming into the United States and enforces U.S. trade laws. CBP is tasked with collecting revenue and identifying harmful and noncompliant imports, such as counterfeit goods and goods that evade duties.

In February 2016, Congress passed an Act that included a provision for GAO to review the effectiveness of CBP's trade enforcement activities. In this report, GAO examines (1) CBP's structure for carrying out trade enforcement , (2) how CBP conducts trade enforcement across its high-risk issue areas and ensures that its enforcement activities are effective, and (3) the extent to which CBP meets its staffing needs for trade enforcement. GAO reviewed agency documents, interviewed agency officials, and conducted field work at ports in Baltimore, Maryland; Los Angeles/Long Beach, California; and New York, New York. GAO selected ports to visit based on factors including volume of imports and number of trade enforcement units at each port.

section_title: What GAO Found
paragraphs: Two offices within U.S. Customs and Border Protection (CBP) enforce U.S. trade laws and protect revenue. The Office of Trade develops policies to guide CBP's trade enforcement efforts, while the Office of Field Operations conducts a range of trade processing and enforcement activities at U.S. ports. CBP's previously port-centric approach to trade enforcement has shifted to a national-level, industry-focused approach with the establishment of the Office of Field Operations' 10 Centers of Excellence and Expertise. These Centers represent a shift in trade operations, centralizing the processing of certain imported goods on a national scale through a single Center rather than individual ports of entry.

CBP conducts trade enforcement across seven high-risk issue areas using a risk-based approach, but its plans generally lack performance targets that would enable it to assess the effectiveness of its enforcement activities. Violations in the high-risk issue areas can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people. CBP's trade enforcement activities reduce risk of noncompliance and focus efforts on high-risk imports, according to CBP. For example, CBP conducts targeting of goods, conducts audits and verifications of importers, seizes prohibited goods, collects duties, and assesses penalties. However, CBP cannot assess the effectiveness of its activities without developing performance targets as suggested by leading practices for managing for results.

Over the past 5 fiscal years, CBP generally has not met the minimum staffing levels set by Congress for four of nine positions that perform customs revenue functions, and it generally has not met the optimal staffing level targets identified by the agency for these positions. Staffing shortfalls can impact CBP's ability to enforce trade effectively, for example, by leading to reduced compliance audits and decreased cargo inspections, according to CBP officials. CBP cited several challenges to filling staffing gaps, including that hiring for trade positions is not an agency-wide priority. Contrary to leading practices in human capital management, CBP has not articulated how it plans to reach its staffing targets for trade positions over the long term, generally conducting its hiring on an ad hoc basis.

This is a public version of a sensitive but unclassified report that GAO issued in April 2017. Information that CBP deemed sensitive has been redacted.

section_title: What GAO Recommends
paragraphs: To strengthen its trade enforcement efforts, CBP should (1) include performance targets in its plans covering high-risk issue areas, and (2) develop a long-term hiring plan specific to trade positions that articulates how it will reach its staffing targets. CBP concurred with both recommendations.

section_title: Letter
paragraphs: International  commerce is an important component of the U.S. economy.  In fiscal year 2015, the Department of Homeland Security’s (DHS) U.S.  Customs and Border Protection (CBP) processed more than $2.4 trillion  in imports coming into the United States through more than 300 ports of  entry. In fiscal year 2015, CBP collected around $46 billion in revenue,  making it the second-largest revenue collection agency in the United  States. While CBP facilitates trade coming into the United States, it must  also enforce U.S. customs and trade laws that protect the nation’s  economy and the health and safety of the American public. CBP utilizes  resources at its ports of entry across the United States to process the  legitimate trade of goods and at the same time identify any harmful and  noncompliant cargo coming into the country, such as counterfeit goods,  goods that are misclassified to evade duties, and goods that were made  using forced labor.

The Trade Facilitation and Trade Enforcement Act of 2015 (the Act) was  signed into law in February 2016 and codified the establishment of CBP.  According to CBP, the Act codified many existing CBP capabilities to  enforce U.S. trade laws and regulations, streamline and facilitate the  movement of legitimate trade, and interdict noncompliant trade. The Act  defines trade enforcement as the enforcement of customs and trade laws  of the United States. Enforcing trade also includes protecting revenue,  which means ensuring that the duties and taxes owed on goods imported  into the United States are collected. The Act contains a provision for GAO  to report on the effectiveness of CBP’s trade enforcement activities and,  among other things, to provide a description of CBP’s organization, use of  resources, and trade enforcement activities covering all priority trade  activities (to include targeting of goods), as well as previous  recommendations related to trade enforcement and the implementation  status of those recommendations.

In this report, we examine (1) CBP’s structure for carrying out trade  enforcement, (2) how CBP conducts trade enforcement across its high- risk issue areas  and ensures that its enforcement activities are effective,  and (3) the extent to which CBP meets its staffing needs for trade  enforcement. We also provide information on audits related to CBP’s  trade enforcement and the implementation status of any  recommendations made in such audits, including some recommendations  that pertain to training related to CBP’s trade enforcement (see app. I).

This report is a public version of a sensitive but unclassified report that we  issued in April 2017. CBP deemed some of the information in our April  report to be sensitive but unclassified, which must be protected from  public disclosure. Therefore, this report omits sensitive information about  targeting. Although the information provided in this report is more limited,  the report addresses the same objectives as the sensitive report and uses  the same methodology.

To examine CBP’s structure for carrying out trade enforcement, we  reviewed organizational charts for CBP and interviewed officials  representing directorates and branches that have a trade enforcement  component within CBP to better understand their role and organizational  structure. To examine how CBP conducts trade enforcement across its  high-risk issue areas and ensures that its enforcement activities are  effective, we reviewed CBP documents pertaining to trade enforcement  and high-risk issues, as well as strategic and annual plans and other  documents. We also interviewed CBP officials who formulate trade policy  and carry out trade enforcement. In addition, we visited CBP field offices  in Baltimore, Maryland; Long Beach, California; and New York, New York,  to observe trade enforcement activities and interview CBP officials  located at air and sea ports. We selected the CBP ports and field offices  to visit based on a number of factors, including the volume of imports  coming through the ports and the number of relevant trade enforcement- related units at the port. To examine the extent to which CBP meets its  staffing needs for trade enforcement, we assessed staffing data covering  fiscal years 2012-2016 for the 15 trade positions that carry out trade  functions identified in CBP’s Resource Optimization Model—a tool that  provides information on the optimal staffing levels necessary to carry out  trade activities and adequately staff offices to address Priority Trade  Issues. The minimum staffing level for 9 of these 15 trade positions was  set by law in the Homeland Security Act of 2002 (Homeland Security  Act). To provide information on audits related to CBP’s trade  enforcement and the implementation status of any recommendations  made in such audits, we analyzed trade enforcement-related audits  published between fiscal years 2011 and 2016. We selected audits that were conducted during this time period, that followed generally accepted  government auditing standards or similar standards, and that contained  recommendations made to DHS or CBP. See appendix II for a complete  description of our objectives, scope, and methodology.

We conducted the performance audit on which this report is based from  May 2016 to April 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with CBP in May 2017 to prepare this public version  of the original sensitive but unclassified report for public release. This  public version was also prepared in accordance with these standards.
subsections: section_title: Background
subsections: section_title: History of CBP and Key Legislation Related to Trade
paragraphs: Historically, the U.S. Customs Service under the Department of the  Treasury was responsible for collecting revenue from trade in the form of  customs duties, taxes, and fees. However, these functions were  transferred to DHS under the Homeland Security Act when the U.S.  Customs Service was merged with parts of the Immigration and  Naturalization Service and the Department of Agriculture’s Animal and  Plant Health Inspection Service to form CBP in March 2003. At that time,  CBP’s priority mission was homeland security, but the agency was also  responsible for facilitating the movement of legitimate trade and people.

Congress required in Section 412(b) of the Homeland Security Act that  the Secretary of DHS, at a minimum, maintain the level of staff and  associated support staff in certain customs revenue functions, which  was in part defined as those functions performed by staff in nine positions  that were present in the U.S. Customs Service when it became part of  DHS in 2003. These customs revenue functions involve trade functions,  including trade enforcement. For the purposes of our report, we refer to  these as the nine mandated trade positions.

Since the creation of CBP, Congress has passed additional legislation  that relates to CBP’s trade functions. For example, the Security and  Accountability for Every Port Act of 2006 (SAFE Port Act) requires CBP to  prepare a resource model to determine the optimal staffing levels that are  required to carry out commercial operations, including inspection and  release of cargo and the revenue functions described in Section 412(b) of  the Homeland Security Act. Accordingly, CBP developed the Resource  Optimization Model for trade positions. In its model, CBP identified the  staffing levels for 15 positions, of which 9 were the mandated trade  positions from the Homeland Security Act, and 6 were nonmandated  trade positions that also perform trade functions. According to CBP, the  Resource Optimization Model generated a staff level range that projects  the optimal staffing levels necessary for each of the 15 positions to  conduct trade processing and enforcement across the seven Priority  Trade Issue areas for a given fiscal year. CBP’s Resource Optimization  Model is based on projected workloads, staffing needs, and attrition levels  for trade positions, according to officials from CBP’s Office of Trade.

The Trade Facilitation and Trade Enforcement Act of 2015 acknowledged  many existing CBP trade practices and enforcement processes, such as  Priority Trade Issues and partnerships with the trade industry, and also  placed additional requirements on CBP, such as enforcing revised U.S.  laws concerning imported goods made using forced labor. The Act covers  trade facilitation and trade enforcement issues such as import safety,  protection of intellectual property, and prevention of evasion of duties.  The Act also requires the development and implementation of Centers of  Excellence and Expertise (Centers) that CBP had already been piloting  and, among other things, centralizes CBP’s trade enforcement and trade  facilitation efforts. According to CBP officials, the Act complements and  bolsters CBP’s existing initiatives to enhance trade enforcement and  facilitation.

section_title: CBP’s Strategic Framework for Trade
paragraphs: According to CBP officials, two strategic documents inform the agency’s  approach to trade enforcement. CBP Trade Strategy, Fiscal Years  2009-2013 is the most recent CBP trade-specific strategy, according to  CBP officials. The strategy lays out four trade goals: (1) facilitate  legitimate trade and ensure compliance, (2) enforce U.S. trade laws and  collect accurate revenue, (3) advance national and economic security,  and (4) intensify modernization of CBP’s trade processes. According to  officials in the Office of Trade, CBP’s current trade priorities are reflected  in CBP’s Vision and Strategy 2020 document. The document lays out  four overarching strategic goals with objectives for CBP and addresses  the agency’s dual security and trade mission. Two of these four goals  address trade enforcement.

section_title: CBP’s Priority Trade Issues
paragraphs: CBP’s Priority Trade Issues are high-risk issue areas in which violations  can cause significant revenue loss, harm the U.S. economy, or threaten  the health and safety of the American people, according to CBP. Priority  Trade Issues focus CBP’s actions and resources to better direct an  effective trade facilitation and enforcement approach, according to CBP.  Table 1 provides information on CBP’s Priority Trade Issues and  examples of violations and enforcement actions that can occur. The Act  required CBP to establish seven Priority Trade Issues, of which five  already existed prior to being mentioned in the Act, according to CBP.

section_title: CBP’s Organization
paragraphs: CBP is led by a Commissioner who oversees CBP’s dual mission of  protecting national security objectives while promoting economic  prosperity and security, according to CBP documents. This mission was  being carried out by more than 60,000 employees as of March 2017, with  less than 20 percent working on trade-related issues, according to CBP  officials. Two of CBP’s six offices are involved in carrying out trade  enforcement: the Office of Trade and the Office of Field Operations (see  fig. 1). Two other CBP offices, Enterprise Services and Operations  Support, provide the Office of Trade and the Office of Field Operations  with technical and administrative support for trade enforcement.

section_title: Flow of Goods into the United States and CBP’s Role
paragraphs: The flow of imports, or goods, into U.S. commerce is a regulated,  multifaceted process that CBP is responsible for facilitating and enforcing.  Imported goods enter at over 300 ports by air, land, or sea. The flow of  goods can be characterized by three stages: pre-entry, entry, and post- entry (see fig. 2).

At pre-entry, before goods leave their country of origin and prior to  goods arriving at a U.S. port of entry, importers and carriers file  paperwork and provide required advance electronic information for  CBP to review.

At entry, importers or brokers file entry documents when goods reach  a U.S. port of entry where CBP scans  and possibly examines  them  for import security and trade enforcement purposes before they enter  into U.S. commerce. In some cases, CBP may target cargo for  examination based on a risk assessment. Cargo that is scanned or  inspected may be deemed as nonadmissible because of trade law  violations, among other things. If CBP finds such violations, it may  seize the cargo and issue penalties and/or fines. If the goods pose a  risk of nonpayment of duties, and the shipment meets certain  requirements, CBP may require additional bond coverage. Admissible  goods are released from the port and enter into U.S. commerce.

At post-entry, importers or brokers file an additional set of entry  summary documents that CBP reviews to ensure trade compliance,  after entry of the goods has been authorized. CBP verifies the  importer’s cargo classifications and calculation of customs duties,  taxes, and fees owed, taking action when needed. For example, CBP  may determine that an importer misclassified cargo in an attempt to  pay lower duty rates, such that the agency issues the importer a bill  for a greater amount based on the proper classification and possibly  applies a penalty. CBP also continues to review and process trade  information provided by the importer. For example, CBP may conduct  audits and reviews and validate information provided by the importer  to check for importer compliance.

section_title: Two of CBP’s Six Offices Conduct Trade Enforcement, with New Centers Changing the Way CBP Carries out Trade Operations Nationally
paragraphs: CBP’s trade policy, processing, and enforcement are primarily carried out  by two offices—the Office of Trade and the Office of Field Operations.  The Office of Trade develops policies to guide trade enforcement efforts,  while the Office of Field Operations conducts a range of trade processing  and enforcement activities at ports. CBP staff in a variety of positions,  including import specialists and CBP officers, conduct a range of trade  processing and enforcement activities. CBP’s previously port-centric  approach to trade enforcement has shifted to a national-level,  industry- focused approach with the establishment of the Office of Field  Operations’ 10 Centers of Excellence and Expertise. These Centers  represent a shift in trade operations, centralizing the processing of  imported goods on a national scale through a single industry-related  Center rather than individual ports of entry.
subsections: section_title: The Office of Trade Develops Trade Policies and Guides the Office of Field Operations’ Trade Enforcement Efforts
paragraphs: Within CBP, the Office of Trade is the lead entity for trade policy and  operational guidance. The Office of Trade is responsible for developing  policy and practices to ensure that importers comply with U.S. trade laws  and regulations, directing enforcement when compliance does not occur,  and facilitating processes with industry partners. The Office of Trade  guides the Office of Field Operations’ trade enforcement efforts at the  ports through policy documents and directives, according to CBP officials.  The Office of Trade is composed of six directorates: five are focused on  trade issues, and one provides human capital and financial support to the  office (see table 2 for a description of the directorates and app. III  for an  organizational chart of the Office of Trade).

The Trade Policy and Programs directorate oversees CBP’s seven  Priority Trade Issues, according to CBP officials. Each branch within this  directorate is headed by a director who oversees components covering  policy, enforcement, targeting, and operations as they relate to  enforcement of the Priority Trade Issues at the field office and port level.  See figure 3 for an organizational chart of the Trade Policy and Programs  directorate and its branches.

section_title: The Office of Field Operations Conducts Trade Operations and Enforcement at Ports throughout the United States
paragraphs: While the Office of Trade focuses solely on trade, the Office of Field  Operations is responsible for both border security and the facilitation of  lawful trade and travel at U.S. ports of entry. The Office of Field  Operations operates 20 field offices located throughout the United States.  The field offices, which are organized by regions, manage over 300 ports  where cargo enters.

The Office of Field Operations is composed of seven directorates, six with  responsibility for trade enforcement and border security, and one that  provides human capital and financial support. According to CBP, four of  the seven directorates and relevant divisions are involved in carrying out  CBP’s trade enforcement. Table 3 describes the four directorates that  carry out trade enforcement as well as one directorate that carries out  human capital and financial support. (See app. III  for the organizational  chart of the Office of Field Operations.)

section_title: Trade Enforcement Activities Are Carried Out by CBP Staff in Various Positions in the Office of Trade and the Office of Field Operations
paragraphs: Within the Office of Trade and the Office of Field Operations, trade  operations and enforcement are carried out by CBP staff in various  positions at ports located throughout the United States and CBP  headquarters. In the Resource Optimization Model, CBP’s Office of Trade  identified 15 positions that carry out trade functions, including the 9  mandated trade positions and 6 nonmandated trade positions that may  perform security functions in addition to trade functions. In this report, we  refer to these 15 positions as trade positions. Thirteen of the 15 trade  positions are located within the Office of Trade or the Office of Field  Operations, one is in Enterprise Services, and one is in Operations  Support (see table 4).

section_title: Centers of Excellence and Expertise Change the Way CBP Conducts Trade Operations by Enhancing Industry Focus at a National Level
paragraphs: CBP’s 10 Centers of Excellence and Expertise have changed the way in  which CBP conducts trade operations, centralizing the processing of  imported goods on a national scale through a single industry-related  Center rather than through individual ports of entry. Within the Office of  Field Operations, the Centers of Excellence and Expertise are organized  by industry, with staff located in ports across the United States (see fig.  4).

Each Center is responsible for performing trade functions related to its  industry sector, such as the processing of entry summary and post-entry  summary documentation and account management, regardless of the  cargo’s port of entry. Each Center is located within a CBP field office and  has a Center director. Each Center is organized into three divisions –  Validation  and Compliance, Enforcement, and Partnership Programs –  each covered by an assistant Center director. Center staff are located at  ports across the United States.

The Centers have made it easier for CBP to gain a national perspective  on the movement of trade, compliance issues, and enforcement patterns;  they also have enhanced commodity expertise and industry-based  knowledge for import specialists, according to CBP officials. Before CBP  established the Centers, documents associated with the imported goods  were processed by import specialists at the ports where the goods  physically entered, so importers had to communicate with multiple import  specialists at ports across the United States to process goods if they  imported goods into more than one port (see fig. 5). As a result, it was  harder for CBP to uniformly process entries and detect import patterns  across the nation. For example, a potential trade violation caught by an  import specialist at one port might not have been caught by an import  specialist at another port. Now, after the establishment of the Centers,  goods are processed by import specialists assigned to specific Centers,  and importers work with one Center. In addition, the Centers have  centralized CBP’s support for the trade community; now the trade  community can reach out to one Center instead of multiple ports with  questions about the import process, according to CBP officials.

With the 10 Centers fully operationalized, Center staff are adjusting to a  new work environment that involves remote teams. Prior to the creation of  the Centers, import specialists were reporting to and managed by a  supervisor and port director located at their port, while national account  managers reported to the Office of Trade. Now, import specialists and  national account managers are reporting to and managed by the Center  they are assigned to, even though they may not be physically co-located  with their supervisors or Center director. According to CBP officials,  entry specialists are currently reporting to their local port supervisors and  managers, but will be reporting to and managed by 1 of the 10 Centers  later in fiscal year 2017. Figure 6 illustrates an example of the remote  management environment of the Electronics Center.

According to CBP officials, Centers and their staff face challenges that  stem mainly from the transition to working in a remote environment and  are making efforts to address these challenges:

Virtual communication. Management and staff are increasing their  usage of technology, teleconferences, and webcams and undergoing  training to facilitate building remote teams. In addition, division  directors and supervisory import specialists may teleconference once  a month to discuss challenges in remote management.

New policies and procedures. Managers are learning different  administrative policies such as leave policies as well as union rules  that vary by port and operating across different time zones. In general,  managers cover one geographic region, so they do not need to learn  every port’s policies.

Funding and support structure. While the Centers do not have a  separate budget to support activities such as travel and do not have  mission support staff, the field offices have generally been supportive,  according to CBP officials. The CBP field offices that house each of  the Center directors have discretion on budget matters and mission  support for the Centers. The Centers also find alternatives to activities  that may require funds, such as attending webinars instead of in- person training.

section_title: CBP Enforces Its Priority Trade Issues through a Layered, Risk-Based Approach but Generally Does Not Have Performance Targets for Its Activities
paragraphs: CBP uses a layered, risk-based approach to guide its trade enforcement  activities across its Priority Trade Issues but generally does not set  performance targets to assess the effectiveness of its activities. CBP’s  trade enforcement activities leverage many different units within CBP and  at other government agencies, according to CBP officials. See figure 7  for examples of these activities by stage of entry of goods into the United  States. CBP has created plans to set goals and objectives for its Priority  Trade Issues; these plans contain some performance measures but  generally lack targets to measure achievements and effectiveness.
subsections: section_title: CBP’s Trade Enforcement Activities Focus on High- Risk Imports and Reducing Risk of Noncompliance
subsections: section_title: Partnering with Industry to Reduce Risk of Noncompliance
paragraphs: CBP focuses on creating partnerships with industry to support its goal of  increasing compliance among importers, according to CBP, and thereby  reducing the risk of allowing noncompliant goods to enter the United  States. According to CBP, partnership with industry helps expedite the  flow of legitimate trade shipments and reduces the examination rate of  low-risk importers, allowing CBP to focus its trade enforcement efforts on  higher-risk importers. Examples of CBP’s partnership programs include  the following:

The Customs-Trade Partnership Against Terrorism (C-TPAT)  program. Through this public–private partnership program, members  of the trade community volunteer to adopt tighter security measures  throughout their international supply chains in exchange for enhanced  trade facilitation, such as expedited processing. According to CBP,  over 50 percent of the imports into the United States by value in 2016  are C-TPAT imports.

The Importer Self-Assessment (ISA). Current members of C-TPAT  can apply to be ISA-certified, which means that importers have  developed and implemented internal controls and assessed risk  based on self-testing. The benefits of ISA to industry, according to  CBP, include importers’ exemption from comprehensive CBP audits,  fewer cargo exams, and faster clearance of cargo at the ports of  entry.

The Trusted Trader Program (currently in a pilot phase). The  Trusted Trader Program’s goal is to unify the current C-TPAT and ISA  processes in order to integrate supply chain security and trade  compliance and further increase the low-risk importer population,  which allows CBP to focus on the high-risk importers. The  development of Trusted Trader is a coordinated effort with members  of the trade community, CBP, and partner government agencies.  The program is carried out by the Partnership Divisions of the Centers  of Excellence and Expertise, which is composed of national account  managers, import specialists, and entry specialists who work with the  Trusted Trader accounts. According to CBP, this arrangement  enables CBP and partner government agencies to provide additional  incentives to participating entities and enhance efficiencies by  managing supply chain security and trade compliance within one  partnership program.

In addition to partnership programs, according to CBP officials, staff at the  Centers work closely with company representatives through meetings and  seminars to enrich their knowledge of products and better understand the  nuances of a particular industry to enhance their ability to identify high- risk importers. According to CBP, such partnerships with the private  sector include participation in the Commercial Customs Operations  Advisory Committee (COAC) to U.S. Customs and Border Protection  working groups, roundtable meetings with industry representatives, and  educational seminars. Another partnership is through E-allegations,  CBP’s online referral process for alleging trade violation(s) by importers,  which provides a means for industry and the public to report to CBP any  suspected violations of trade laws or regulations related to the importation  of goods into the United States.

section_title: Targeting High-Risk Shipments
paragraphs: CBP’s targeting efforts are carried out by different targeting groups at the  national and port levels, and can support or help identify enforcement  actions that are carried out on high-risk shipments. Targeting involves  obtaining information about the shipment entering U.S. ports and those  parties involved in moving the cargo and goods, such as the importer.  Targeting groups develop user-defined rules (targeting rules) based on  advance data, research, and other information that might show trends or  emerging trade issues. The targeting rules are generally entered into  CBP’s Automated Targeting System and flag certain cargo and goods for  CBP officials responsible for trade enforcement to inspect or review  documentation for potential trade violations. The targeting rules are  ranked as mandatory, or high-, medium-, or low-risk, providing CBP  officials some discretion on the need to take action.

At the national level, CBP’s targeting efforts are carried out by different  units, according to CBP. Within the Office of Trade, the National  Targeting and Analysis Groups (NTAG) and Commercial Targeting and  Analysis Center (CTAC) target for further review high-risk imports that are  related to the Priority Trade Issues. Currently there are five NTAGs,  located in various locations across the country and staffed mainly by  international trade specialists who specialize in targeting mainly at post- entry for their respective Priority Trade Issue. The CTAC facilitates  information sharing among partner government agencies on targeting and  enforcement at all stages of the import process – pre-entry, entry, and  post-entry – focusing on a variety of issues, including import safety and  environmental crime, natural resources, wildlife trafficking, and cultural  property, according to CBP. These targeting groups also collect  information to develop targeting rules from import specialists who are  assigned to 1 of the 10 Centers that cover their respective industry.

Also at the national level, the Office of Field Operations’ National  Targeting Center provides advance targeting, research, and coordination  for CBP field units, the intelligence community, foreign counterparts, and  investigative and law enforcement agencies in support of CBP’s  antiterrorism mission and includes a cargo component focused on trade  called the Tactical Trade Targeting Unit. This unit provides a national  targeting perspective and is focused on developing user-defined rules  that have a high probability of leading to investigations, according to  National Targeting Center officials. The National Targeting Center  established an integrated operational network, known as the Integrated  Trade Targeting Network (the network), between all of CBP’s national  level trade targeting assets in the Office of Trade and the Office of Field  Operations. According to CBP officials, the purpose of the network is to  improve communication, coordinate actions, and standardize procedures  for more effective trade targeting. The network provides training to  enhance the knowledge of relevant CBP field and headquarters  personnel in the areas of automated targeting and reporting systems and  targeting techniques.

At the port level, CBP’s targeting efforts are also carried out by CBP  officers who utilize user-defined rules to identify high-risk cargo coming  through the port for examination, according to CBP officials. CBP officers located at ports must examine all shipments that have a mandatory rule in  the Automated Targeting System, but are given discretion to examine or  not examine cargo for all other nonmandatory rules, according to CBP.  For example, the targeting rules may trigger a requirement that CBP hold  up the movement of a specific shipment at a port (called “holds”) until  CBP officers can examine the shipment or import specialists can review  documentation to determine whether there are possible trade violations.  CBP may also conduct targeting based on advance information it  receives on shipments coming into ports (see fig. 8 for an example of  goods seized as a result of targeting).

CBP’s targeting efforts can support enforcement operations that are  carried out by numerous CBP entities such as import specialists,  agriculture specialists, and CBP officers as well as U.S. Immigration and  Customs Enforcement’s (ICE) Department of Homeland Security  Investigations (HSI), a partnering component agency of CBP under the  Department of Homeland Security, and other partner government  agencies. For example, CBP reported in December 2016 that it  conducted several operations in the last quarter of fiscal year 2016  focused on targeting counterfeit goods—such as apparel, footwear, auto  parts, and handbags—coming through express consignment and  international mail facilities. CBP reported that these operations resulted in  seizures of 948 shipments of counterfeit goods with an estimated  manufacturer’s suggested retail price of over $20 million for the goods.

section_title: Conducting Audits and Validating Trade Compliance
paragraphs: CBP conducts post-entry audits and validation activities to assess trade  compliance and identify possible trade violations across the Priority Trade  Issue areas. Customs auditors in the Regulatory Audit directorate within  CBP’s Office of Trade reported that they use a risk-based approach to  select candidates for assessment. According to officials from Regulatory  Audit, their audit plans tend to focus on examining importers with high  dollar value shipments and potential risk to revenue—generally  large and  midrange importers. Regulatory Audit conducts various types of audits  and reviews, including the following:

Focused assessment–comprehensive audits of major importers.

These audits assess internal control over import activities to  determine whether the importers pose acceptable risk for complying  with CBP laws and regulations. Such assessments can look at value,  classification, free trade agreements, intellectual property rights, free  trade zones, prior disclosures, and antidumping and countervailing  duties.

Quick response audits–targeted compliance audit with  narrowly  defined objectives. These audits focus on a single issue or specific  concern referred to Regulatory Audit by CBP’s NTAG or ICE, and  cover Priority Trade Issues and other areas. Such audits can cover  antidumping, intellectual property, import safety, textiles and wearing  apparel, drawback, and foreign trade zone issues.

Surveys of importers. These surveys are performed as a result of an  assertion or allegation, such as an e-allegation, with an objective to  obtain an understanding of a company’s importing practices to  determine if there are concerns that merit future CBP consideration.

Regulatory Audit officials we met with in Los Angeles and New York told  us that the majority of their assignments are made up of quick response  audits and surveys. According to CBP officials, the audits and reviews  can result in the collection of additional revenue. For example, Regulatory  Audit in headquarters reported that for fiscal year 2015, it identified,  through its audit recommendations, over $109 million of revenue owed by  importers and was able to collect almost $60 million that year. The  audits and reviews also provide informed and enforced compliance to the  trade community and act as a deterrent by discouraging potential  violators.

In addition to activities carried out by Regulatory Audit, the Centers also  conduct validation  and compliance checks by reviewing post-entry  importer records. All Centers have a division that conducts validation and  compliance checks to ensure importer compliance. The checks are  mainly carried out by teams of import specialists that specialize in  different commodity types within their industry section. For example, by  reviewing an importer’s post-entry summary records, the Center may  validate that the entry complied with all conditions to be treated as a  specific commodity under free trade agreements in which the United  States is a party. When prompted by mandatory targeting rules, import  specialists at the Centers are also responsible for reviewing the importers’  post-entry documentation and recording in the Automated Targeting  System whether any potential violations were found. Some officials from  targeting groups that we met with told us that import specialists are  inconsistent about recording the results of the reviews they conduct,  which impedes the targeting groups’ ability to assess the effectiveness of  their targeting rules. According to Center procedures, import specialists  are responsible for working with importers to ensure future compliance if  violations have occurred and goods are seized or penalties are issued.

section_title: Seizing Unlawful Goods and Issuing Penalties
paragraphs: CBP can take actions against noncompliant importers when applicable.  For example, CBP can seize imported goods if it believes there is a  violation of a trade law. The types of seized shipments range across the  different Priority Trade Issue areas such as intellectual property rights,  textiles, wearing apparel, and import safety (see fig. 9). For instance,  according to CBP, 28,865 shipments were seized based on intellectual  property rights violations in fiscal year 2015. The top five categories for  intellectual property rights seizures include consumer electronics and  pharmaceuticals, each of which often involve shipments that pose threats  to consumer safety. According to CBP, as part of the seizure process, the  Office of Field Operation’s Fines, Penalties and Forfeitures office will  send the importer or another relevant party a notice of seizure. Any  interested party may file a petition for relief from seizure within 30 days,  according to CBP. CBP stores the seized goods until a final decision is  made; if it does not return the goods to the importer, it generally destroys  or sells the goods, as appropriate.

CBP also has the authority to issue penalties and/or fines against  importers, brokers, and other entities bringing goods into the United  States that violate the law. Penalties may result, for example, if products  are not properly marked with the country of origin, trademarks are  violated with counterfeit goods, or illegal goods such as controlled  substances are found. Penalties are monetary and are established by  statute, according to CBP. In fiscal year 2015, CBP assessed over $237  million in penalties for violations related to its Priority Trade Issues and  collected $3.5 million, according to CBP.

section_title: Conducting Investigations Stemming from Trade Violations
paragraphs: CBP officials collaborate with officials from the HSI directorate within ICE  on civil and criminal cases involving trade fraud, according to CBP and  HSI officials. CBP and HSI coordinate at the field office level through  regularly scheduled meetings, according to HSI officials. At these  meetings, according to HSI and CBP officials, HSI special agents meet  with CBP officials, such as import specialists, customs auditors, and  international trade specialists, to discuss potential and active cases and  upcoming operations. While HSI officials have traditionally worked with  local import specialists, they have had to adjust to working with import  specialists located in other cities because of the virtual nature of the  import specialists at the new Centers of Excellence and Expertise. For  example, HSI officials in one city may be working on a case that involves  a commodity assigned to a particular Center, but CBP no longer has a  local import specialist that works for that Center—so the HSI officials  must work with the import specialist located in another city who works for  that Center, according to HSI officials. This has caused a decrease in  cooperation and communication between CBP and HSI resulting in fewer  investigations, according to HSI.

CBP officials will share information on suspected activities or importers  that are noteworthy based on their own trade enforcement efforts, which  may lead to an HSI investigation. For example, while processing  shipments entering the United States, import specialists at the Centers  may identify unusual trade patterns or documentation discrepancies for  shipments of significance, such as large volume or value, with the  shipments having health and safety or national security concerns,  according to CBP officials. In addition, according to CBP officials,  customs auditors from Regulatory Audit may send referrals to HSI if they  find potential fraud or other significant issues during their audits of  importers. Officials from CBP’s Fines, Penalties and Forfeitures office  might also work with HSI on cases that may include seizures of goods.  According to Fines, Penalties and Forfeitures officials at one of the ports  we visited, more than 50 percent of their time is spent working with HSI  on cases involving seized property. According to CBP and HSI officials,  other U.S. partner government agencies may also be involved in  investigations involving trade violations.

CBP also conducts investigations stemming from allegations brought forth  by industry and pertaining to the Enforce and Protect Act of 2015.  According to the Office of Trade, such investigations draw upon the  expertise of resources that include the Centers, targeting groups, and  Regulatory Audit to look into the allegations and share the outcomes of  investigations with industry.

section_title: CBP Articulates Some Performance Measures but Generally Lacks Targets for Trade Enforcement Activities, Which May Impede Its Ability to Assess Effectiveness
paragraphs: CBP has created strategic or annual plans that contain strategic goals for  its Priority Trade Issues and some performance measures but generally  lack targets to measure achievements and effectiveness. Leading  practices for managing for results note, among other things, that a plan  should identify goals and measures covering each of its program activities  and contain targets to assess progress toward performance goals.  Numerical targets or other measurable values facilitate further  assessments of whether overall goals and objectives were achieved  because comparisons can be easily made between projected  performance and actual results. The Act mandates CBP to develop by  February 24, 2017, a joint strategic plan with ICE that incorporates  enforcement activities and performance measures. However, the Act  does not require that the strategic plan include targets. Currently this plan  is in draft form, according to CBP and, because the plan is still changing,  CBP declined to share a copy and declined to discuss the extent to which  the plan would identify performance measures and targets that would  enable CBP to gauge the effectiveness of its activities by Priority Trade  Issue.

We asked CBP to provide us with strategic or annual plans for its seven  Priority Trade Issues to determine how the agency measures its  effectiveness in carrying out its trade enforcement efforts for each Priority  Trade Issue area. CBP provided us with various plans for its Priority  Trade Issues. While one of these Priority Trade Issues had plans that  were current, the other Priority Trade Issues either did not have a plan or  were using plans that had not been updated in several years. According  to officials from the Office of Trade, CBP is in the process of finalizing  plans for those Priority Trade Issues with outdated plans or no plans (see  app. IV for the status of strategic or annual plans by Priority Trade Issue,  as of February 2017).

Our analysis of all the Priority Trade Issue plans provided to us shows  that they generally lacked performance targets that would enable CBP to  assess the effectiveness of its enforcement activities. While we found  that most plans identified strategic goals, some plans had performance  measures but generally did not contain performance targets that would  allow CBP to assess its actual performance against planned performance  or compare to past performance. For example, the AD/CVD annual plan  for fiscal year 2017 has a number of performance measures that pertain  to enforcement and these include reporting the number of AD/CVD- related audits, nonaudit services, surveys conducted, and importers  removed from a targeting rule. However, CBP did not set a target level  for performance for these measures in the plan, such as the target  number of AD/CVD-related audits and surveys to be conducted. Without  targets, CBP may not be able to determine the effectiveness of its trade  enforcement activities, particularly to see if its projected performance for  an activity met its actual results.

CBP also reports on some trade enforcement performance measures  related to its Priority Trade Issues in various documents, including reports  mandated by Congress and annual reports prepared by various CBP  entities. For example, a textiles report to Congress describes the types  and number of enforcement actions taken, such as the number and value  of seizures and penalties and the number of cargo examinations  conducted by fiscal year. Also, in its first annual report covering its  operations and programs for fiscal year 2015, CTAC—which covers  CBP’s import safety Priority Trade Issue—reported on the number of  seizures by operations that were conducted with U.S. partner government  agencies, ineligible products that were prevented from entering the United  States, and the number of enforcement operations conducted, among  other things. However, while these metrics allow yearly changes to be  identified and tracked, none of the two reports we reviewed included  targets that would help officials with oversight responsibilities assess  performance and the effectiveness of the CBP’s enforcement activities.

section_title: CBP Has Not Met Its Staffing Targets for Some of Its Trade Positions, Which Can Impact CBP’s Trade Enforcement Efforts
paragraphs: Over the past 5 fiscal years, CBP generally has not met the minimum  staffing levels set by Congress for four of nine positions that perform  customs revenue functions, and it generally has not met the optimal  staffing level targets set by the agency for these positions. The Homeland  Security Act set mandatory minimum staffing levels for nine mandated  trade positions. CBP’s Resource Optimization Model projected optimal  staffing levels for the 15 identified trade positions, 9 mandated and 6  nonmandated, for the period of fiscal years 2015 through 2022. Staffing  shortfalls can lead to decreased effectiveness of trade enforcement. CBP  faces several challenges to hiring and filling staffing gaps, according to  CBP officials. We found that CBP has not articulated how it plans to  address challenges to filling staffing gaps for trade positions.
subsections: section_title: CBP Has Not Met Its Staffing Targets for Some of Its Trade Positions
paragraphs: Our analysis of CBP data from fiscal years 2012 through 2016 shows  that the numbers of staff in four of the nine mandated trade positions –  import specialist, customs auditor, national import specialist, and  drawback specialist – were generally below the minimum mandated  staffing and optimal staffing levels. In addition, staffing levels for these  positions generally declined during this period. Staffing levels for import  specialists provide an example. The Homeland Security Act set the  minimum mandated staffing level for import specialists at 984, and CBP’s  Resource Optimization Model calculated an optimal staffing level range  from 984 to 1,748 import specialists for fiscal years 2015 through 2022.  However, the actual staffing levels were below the mandated levels for 4  of the 5 years, consistently declining in the last 3 years from 954 import  specialists at the end of fiscal year 2014 to 917 import specialists at the  end of fiscal year 2016.

The actual staffing levels for customs auditor, national import specialist,  and drawback specialist were also generally below the minimum  mandated staffing levels from fiscal years 2012 through 2016 and below  the optimal staffing level targets in fiscal years 2015 and 2016. In  addition, the staff levels for the financial system specialist position were  below the mandated levels for 2 out of the 5 fiscal years and below  optimal staffing levels for both fiscal years 2015 and 2016. For the four  other mandated trade positions, CBP met or exceeded the mandated  staffing levels. See table 5 for a list of mandated trade positions and their  mandated and optimal staffing levels compared to actual staffing levels as  of the end of fiscal years 2012 through 2016.

For the six nonmandated trade positions identified in CBP’s Resource  Optimization Model, CBP reported that actual staffing levels for five of the  positions, as of October 2014, were below the optimal staffing range.

For example, the actual level of staff for the CBP officer position, as of  October 4, 2014, was significantly below the optimal staffing range, with  an actual staff level of 6,889, representing about 1,800-2,800 fewer CBP  officers on board than the model’s optimal staffing level. See table 6 for  the optimal and actual staffing levels for nonmandated trade positions as  reported by CBP, but not mandated by the Homeland Security Act.

The optimal and actual staffing levels for the nonmandated trade  positions, according to CBP officials, are based on an estimated  percentage of time that staff spend on trade functions. For example, while  there were 22,000 CBP officers overall in fiscal year 2014, CBP reported  that the full-time equivalent of 6,889 staff spent time on trade activities.

All of the nonmandated trade positions, except the Chemist position,  assigned to Operations Support, are assigned to the Office of Field  Operations.

section_title: Trade Position Staffing Shortfalls Can Impact CBP’s Trade Enforcement Efforts
paragraphs: Staffing shortfalls in certain key trade positions can also impact CBP’s  ability to identify and address risk in trade operations. For example,  according to officials from Regulatory Audit in headquarters, if CBP met  the mandatory staffing levels for customs auditor, Regulatory Audit would  be able to more effectively address risk in the multitude of trade areas.  Specifically, they told us that Regulatory Audit would be able to increase  the number of importers it audits and expand the scope of their work. In  addition, according to Office of Field Operations officials, if CBP met the  mandatory staffing levels for import specialists, Centers could conduct  more enforcement operations and focus on specific trade issues.

Staffing shortfalls in trade positions can impact CBP’s trade processing  and enforcement efforts, including CBP’s ability to enforce trade  effectively. For example, staffing shortfalls can lead to decreased cargo  inspections, according to several CBP officers at three ports we visited.  According to these CBP officers, CBP officers at ports respond to rules  from targeting groups to inspect cargo for trade violations, particularly  when the instructions are mandatory. CBP officers have discretion to  inspect cargo that is characterized as nonmandatory, which may be  helpful in gaining new information about potential trade violations  according to CBP officers. However, according to CBP, with staffing  shortages of CBP officers, some CBP officers told us that they focus their  efforts on addressing the mandatory inspections and may not be able to  conduct any additional inspections, contributing to missed opportunities  for assessing risk.

Shortfalls in CBP officers may also lead to reassigning CBP officers  during high periods of traffic volume, as we found in a 2013 report. In  2013, at three of the six land borders visited, CBP field and port officials  reported to us that CBP had insufficient staff to process cargo arriving by  commercial vehicles. As a result, CBP had to reduce the number of CBP  officers assigned to secondary inspection to open up additional primary  inspection lanes for commercial traffic. We reported that staffing  shortages were caused in part by budget constraints and time needed to  train and assign new CBP officers. In addition, during our port visits,  some CBP officers told us that they were pulled from trade functions,  such as examining air consignment cargo, to temporarily fill shortages of  CBP officers needed to screen air passenger traffic, particularly during  the holidays and summer.

section_title: CBP Faces Challenges to Hiring for Trade Positions
paragraphs: CBP faces a number of challenges to hiring staff for trade-related  positions, such as other hiring priorities and limited numbers of staff  focused on hiring for trade positions, according to CBP officials we met  with. Some of the hiring challenges identified by CBP officials we met with  include the following:

Hiring priorities focused on security positions. CBP has focused on  hiring staff for security positions, such as border patrol agents and  CBP officers, and hiring for trade positions is not an agency-wide  priority. Furthermore, trade positions with mandated staffing levels,  such as import specialists, have not been hiring priorities.

Limited numbers of staff focused on hiring trade positions. CBP’s  hiring centers have limited numbers of staff dedicated to hiring for  trade positions. As a result, they have a backlog in hiring for trade  positions.

Lengthy hiring process. Filling trade positions within the Office of  Trade and the Office of Field Operations is a lengthy process.  Potential candidates tend to drop out because of the time it takes to  process an applicant. All positions require lengthy background  investigations, and some positions, such as CBP officers, require a  polygraph and additional clearances, which can take a long time.

Location-based issues. Some positions, such as customs auditor, are  harder to fill because other government agencies or the private sector  are competing for the same pool of applicants with specialized  knowledge, or because the positions are in locations that are less  desirable for applicants. CBP does not offer incentives to recruit  potential candidates for mandated trade positions, according to CBP  officials.

section_title: CBP Has Not Articulated a Long-Term Plan for Addressing Staffing Shortfalls in Hiring for Trade Positions
paragraphs: CBP has not articulated how it plans to address gaps in staffing for most  of its trade positions. While CBP has established targets, it has not  articulated a plan to attain those numbers or how budgetary constraints, if  any, impact its ability to meet staffing levels. Leading practices in human  capital management indicate that agencies, through strategic workforce  planning, should address developing long-term strategies for acquiring,  developing, and retaining staff to achieve programmatic goals.  Specifically, leading practices suggest that agencies have a plan to  identify strategies for recruiting staff that includes customized strategies  to recruit highly specialized and hard-to-fill positions. Such a plan would  help CBP to ensure that it meets its staffing targets for trade positions,  particularly those positions where it has not met its mandated staffing  levels for a number of years. However, we found that CBP has not  developed such a plan and, during the course of our audit, we found that  it generally conducts hiring for trade positions on an ad hoc basis. For  example, officials from the Office of Field Operations told us that CBP  hired for import specialist positions, as well as most other trade positions,  on an as-needed basis based on requests coming from specific port  locations.

Officials from the Office of Field Operations told us that they are planning  to take some actions to meet its staffing targets for trade positions. In  December 2016, these officials said that CBP would post general import  specialist job announcements starting in December 2016 and renew the  announcements as necessary throughout fiscal year 2017. CBP officials indicated in March 2017 that several announcements were posted in late  December and that there were over 4,000 applicants for the external  announcement pertaining to general import specialist. These officials also  stated that CBP plans to track and facilitate the Office of Field Operations’  progress toward selecting a sufficient number of applicants by June 2017  to fill all import specialist vacancies, but made no mention of recruiting or  retention strategies in general or in hard-to-fill locations. In addition, in  February 2017, officials from the Office of Trade told us that they are  planning to create a hiring plan for customs auditors and are seeking  incentives, but did not provide any time frames.

section_title: Conclusions
paragraphs: As an agency tasked with collecting revenue and identifying  harmful and  noncompliant imports, such as counterfeit products and goods that are  misclassified to evade duties, CBP needs to ensure that it effectively  enforces U.S. customs and trade laws while at the same time facilitating  legitimate trade. In 2015, CBP officials processed more than $2.4 trillion  in imports through more than 300 ports of entry and collected around $46  billion in revenue, making CBP the second-largest revenue collection  agency in the United States. In 2016, Congress passed the Trade  Facilitation and Trade Enforcement Act, which codified the establishment  of CBP and highlighted the numerous units within CBP’s Office of Trade  and Office of Field Operations that play a critical role in CBP’s trade  enforcement process. CBP’s strategic and annual plans for its Priority  Trade Issues are intended to help focus the agency’s actions and  resources on high-risk issues and direct its trade facilitation and  enforcement approach. These plans identify goals and contain some  performance measures. However, these plans generally lack  performance targets, contrary to leading management practices. Without  performance targets, CBP cannot assess its actual performance against  planned performance or the effectiveness of its trade enforcement  activities.

Congress passed the Homeland Security Act of 2002, directing CBP to  maintain, among other things, a minimum level of staff and associated  support staff in certain customs revenue functions. In 2006, Congress  directed CBP in the SAFE Port Act to prepare a resource model to  determine the optimal staffing levels that are required to carry out  commercial operations, including inspection and release of cargo and the  revenue collection and trade functions described in section 412(b) of the  Homeland Security Act. In its model, CBP outlined optimal staffing levels  for 15 positions needed to perform trade functions and adequately staff  Priority Trade Issues; 9 of the 15 are congressionally mandated trade  positions. Our analysis of CBP staffing data over the past 5 fiscal years  shows that CBP has generally not reached the optimal and mandated  staffing levels for some of the 15 trade positions that carry out trade  enforcement and protect revenue, such as import specialists, CBP  officers, and customs auditors. CBP officials cited several challenges to  filling staffing gaps, including that hiring for trade positions is not an  agency-wide priority. Contrary to leading practices in human capital  management, CBP has not articulated how it plans to reach its staffing  targets for trade positions over the long term. Without adequate numbers  of staff to carry out its numerous trade enforcement activities, CBP faces  challenges to effectively carrying out its mandated mission to enforce  U.S. trade laws.

section_title: Recommendations for Executive Action
paragraphs: To strengthen CBP’s trade enforcement efforts, we recommend that the  Commissioner of CBP direct relevant CBP units to take the following two  actions:

The Office of Trade should include performance targets, when  applicable, in addition to performance measures in its Priority Trade  Issue strategic and annual plans.

The Office of Trade and the Office of Field Operations should develop  a long-term hiring plan that articulates how CBP will reach its staffing  targets for trade positions set in the Homeland Security Act and the  agency’s resource optimization model.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report for review and comment to CBP and  ICE. CBP provided technical comments for the sensitive but unclassified  version of the report, which we also incorporated in this report, as  appropriate. ICE also provided technical comments on this report, which  we incorporated, as appropriate. CBP provided formal agency comments,  which are reproduced in appendix V. In its comments, CBP concurred  with both of our recommendations and identified actions it intends to take  in response to the recommendations. In response to our first  recommendation, CBP indicated that it will work to identify applicable  performance measures with performance targets to include in the fiscal  year 2018 annual and strategic plans for its Priority Trade Issues. In  response to our second recommendation, CBP indicated that the Office of  Trade and the Office of Field Operations will partner with the Office of  Human Resources Management to identify stakeholders and define  challenges that have resulted in hiring gaps in trade-related positions and  to develop a long-term hiring and resource plan.

We are sending copies of this report to the appropriate congressional  committees, the Acting Commissioner of CBP, and the Acting Director of  ICE. In addition, the report is available at no charge on the GAO website  at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-8612 or GianopoulosK@gao.gov.  Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI.

section_title: Appendix I: Past Audit Findings and Recommendations Related to U.S. Customs and Border Protection Trade Enforcement, Fiscal Years 2011-2016
paragraphs: We identified a total of 24 reports issued between fiscal years 2011 and  2016 that are related to trade enforcement and contain recommendations  to the Department of Homeland Security (DHS) or U.S. Customs and  Border Protection (CBP). Nine of these reports were audits conducted by  GAO, while 13 were audits and 2 were inspections conducted by the DHS  Office of Inspector General (OIG). This appendix provides an overview of  key findings and relevant recommendations from these reports, as well as  the status of actions taken to implement the recommendations.
subsections: section_title: Key Findings and Recommendations from GAO Audits Issued between Fiscal Years 2011 and 2016
paragraphs: We identified nine GAO audits, issued between fiscal years 2011 and  2016 and related to trade enforcement, that have recommendations to  DHS or CBP. Of the nine audits, two reviewed antidumping and  countervailing (AD/CV) duties; three reviewed targeting; two reviewed  other topics; and two reviewed the agricultural quarantine inspection  (AQI) program, a program that guards against harmful agricultural pests  and diseases by inspecting imported agricultural goods, products,  passenger baggage, and vehicles at ports of entry. Table 7 lists the nine  GAO audits.

These nine GAO audits contain a total of 46 recommendations, 33 of  which concern trade enforcement and are addressed to DHS or CBP.  Topics of these 33 recommendations fall into four general categories:  AD/CV duties, agriculture (specifically the AQI program), targeting and  cargo examination, and other (see fig. 10 for a breakdown of  recommendations by topic).

Some of these 33 GAO recommendations address weaknesses  concerning adequate data reliability, guidance, or performance measures  as they relate to the four topics.

Recommendations for addressing data reliability include, among other  things:  improving the reliability of AQI data on arrivals, inspections, and  interceptions across ports; developing a better national estimate of compliance with maritime  cargo targeting policies by calculating compliance rate differently; and developing an enhanced methodology for selecting samples to check  compliance with policies on examining high-risk shipments.

Recommendations for addressing guidance include, among other things:  revising guidance to include how targeters are to correctly enter data  in targeting systems; updating guidance on how ports are to conduct work studies to  determine the correct allocation of staff time; and updating guidance with requirements to establish time frames for  issuing trade alerts for exclusion orders, which are notices that the  International  Trade Commission (ITC) issues to not allow certain  imports that infringe upon certain intellectual property rights or other  unfair import practices into the United States.

Recommendations for addressing performance measures include, among  other things:  reviewing performance against established time frames; and  identifying performance measures for monitoring effectiveness in  targeting, AD/CV duty collection, and protecting U.S. agriculture from  introduction of foreign pests and disease.

In the nine reports issued between fiscal years 2011 and 2016, GAO  made 33 recommendations to DHS or CBP, of which 24 have been  closed as implemented, and 9 remain open (see table 8 for the status of  GAO’s open recommendations, as of October 2016). Most of the open  recommendations come from two GAO reports. Three of the nine open  recommendations are found in GAO’s July 2016 report on $2.3 billion in  unpaid AD/CV duty bills. In addition, another three open recommendations are found in GAO’s July 2013 report on U.S.-Mexico  border wait times. This report on U.S.-Mexico border wait times stated  that CBP’s Office of Field Operations (OFO) could help CBP better  ensure that scarce staff resources are effectively allocated to fulfill  mission needs across ports by improving transparency, that is,  documenting the methodology and process OFO uses to allocate staff to  land ports of entry on the southwest border.

section_title: Key Findings and Recommendations from DHS OIG Reports Issued between Fiscal Years 2011 and 2016
paragraphs: We identified 15 reports, which include 13 audits and two inspections  issued between fiscal years 2011 and 2016 by DHS OIG related to trade  enforcement that have recommendations to DHS or CBP. Six of the DHS  OIG audits were independent auditors’ reports on CBP’s financial  statements. Of the remaining nine reports, three reviewed targeting and  cargo examinations, and the other six each reviewed different topics: the  bonding process; the Office of Regulatory Audit; the penalty process; the  workload staffing model; bonded facilities; and the Automated  Commercial Environment, the central trade data collection system used  for, among other things, receiving users’ standard data and other relevant  documentation required for the release of imported cargo. See table 9 for  a list of these DHS OIG reports.

The 15 DHS OIG audits and inspections contain a total of 142  recommendations, 103 of which pertain to trade enforcement and are  addressed to DHS or CBP. Eighty-five of these 103 recommendations  originate from the six independent auditors’ reports on CBP’s financial  statements and cover recurring topics. Topics of the recommendations  fall into 11 general categories. For a breakdown of DHS OIG  recommendations by topic, see figure 11.

Some of these 103 DHS OIG recommendations addressed weaknesses  concerning guidance or strategy or procedures, as they relate to the 11  topics.

Recommendations addressing guidance include, among other things,  providing guidance to ports and field offices to ensure that employees  resolve reports during the in-bond process,  review bonded warehouses and foreign trade zones facilities, and use the correct targeting criteria for rail shipments.

Recommendations addressing strategy and procedures, among other  things, include establishing written procedures or conducting assessment  for developing, changing, and using the Workload Staffing Model, an  Excel spreadsheet-based model that CBP uses to identify staffing  needs for CBP officers at ports of entry; and determining whether resources are appropriately allocated to ensure  effective penalty case management at Fines, Penalties and  Forfeitures field offices.

Of the 103 DHS OIG recommendations pertaining to trade enforcement  and addressed to DHS or CBP, 85 have been closed and 18 remain open  (see table 10 for a list of DHS OIG reports with open recommendations  and their status as of October 24, 2016). DHS OIG officials report that the  agency concurred with these open and closed recommendations. The  18 open recommendations originate from five reports. In one particular  report, the independent public accounting firm KPMG LLP (KMPG)  recommended that CBP implement additional training at ports and/or  additional oversight controls to ensure that risk assessments for bonded  warehouses and foreign trade zones (FTZ) are consistently performed in  accordance with required guidelines. KMPG had found that CBP was  unable to provide evidence of completing compliance reviews to support  the assessed risk level for certain bonded warehouses and FTZ reviews,  and improperly recorded the risk level of an FTZ based on the compliance  review that was conducted. KMPG found that the problem was that CBP  personnel did not consistently adhere to bonded warehouses’ and FTZs’ policies and procedures for completing compliance reviews. These  conditions increased the risk that imported goods awaiting entry into  commerce may not be secure, which could result in a loss of revenue.

KMPG also recommended that CBP implement additional training at port  locations on tracking in-bond entries for compliance. An in-bond entry  allows for the movement of cargo through the United States without  payment of duty or appraisement prior to entry into either domestic  commerce or exportation to a foreign country, and CBP oversees in-bond  compliance using the In-Bond Compliance Module. However, KMPG  found that port personnel did not have a clear understanding of how to  operate the compliance module, which, according to OIG-15-76, may  result in missed opportunities for CBP to assess fines and penalties and  collect the associated revenues.

section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: This report examines (1) U.S. Customs and Border Protection’s (CBP)  structure for carrying out trade enforcement, (2) how CBP conducts trade  enforcement across its high-risk issue areas and ensures that its  enforcement activities are effective, and (3) the extent to which CBP  meets its staffing needs for trade enforcement. We also provide  information on audits related to CBP’s trade enforcement and the  implementation status of any recommendations made in such audits.

To examine CBP’s structure for carrying out trade enforcement, we  reviewed organizational documents for CBP, specifically for the Office of  Trade and the Office of Field Operations. We also spoke with CBP  officials in headquarters representing directorates and branches that have  a trade enforcement component within CBP to better understand their  role and organizational structure. We interviewed CBP officials in the field  who carry out trade enforcement to learn about their roles and  responsibilities. The trade enforcement staff we spoke to in the field  include the following positions: Customs and Border Protection officer;  entry specialist; import specialist; national account manager; drawback  specialist; customs auditor; international trade specialist; agriculture  specialist; paralegal specialist; Fines, Penalties and Forfeitures specialist;  and seized property specialist. We also interviewed officials at all 10  Centers of Excellence and Expertise (Centers) and asked most Centers  questions pertaining to the Center’s organizational structure and  resources, the benefits of having Centers, and any challenges that they  have faced since the Centers became operational.

To examine how CBP conducts trade enforcement across its high-risk  issue areas and ensures that its enforcement activities are effective, we  reviewed CBP documents pertaining to trade enforcement and Priority  Trade Issues, as well as planning documents. We interviewed CBP  officials who set policy and conduct enforcement activities for Priority  Trade Issues in headquarters as well as CBP officials in the field who  carry out trade enforcement activities. Specifically, we met with officials  representing units within the Office of Trade and the Office of Field  Operations: National Targeting Center; Regulatory Audit; Fines, Penalties  and Forfeitures Office; and Trade Operations Division. We also spoke  with CBP officials representing every National Targeting and Analysis  Group and the Commercial Targeting and Analysis Center to learn about  their role in trade enforcement by Priority Trade Issue and to understand  their coordination with other units within CBP. We visited CBP ports and  field offices in Baltimore, Maryland;  Los Angeles/Long Beach, California;  and New York, New York to observe trade enforcement activities and  interviewed CBP officials located at the sea and air ports. We visited an  international mail facility at John F. Kennedy airport to learn about trade  enforcement in the mail environment and observed cargo being inspected  at a DHL facility at the Los Angeles airport. We selected the CBP ports  and field offices to visit based on a number of factors, including the  volume of imports coming through the ports, the number of relevant trade  enforcement-related units at the port, the port environment (locations with  cargo arriving by air, sea, and through international mail), and the  proximity of the port to our location. We interviewed officials at all 10  Centers of Excellence and Expertise and asked questions pertaining to  the Centers’ coordination within and outside of CBP, strategy, and data  collection. We did not visit and observe any land ports of entry because of  limited time frames. However, during our interviews, CBP officials  discussed trade enforcement processing and other activities that occur at  the land borders. We spoke with Immigration and Customs Enforcement  (ICE) Homeland Security Investigations (HSI) officials in Washington,  D.C., and in New York to learn about ICE and HSI’s role in trade  enforcement as well as to understand how HSI coordinates with various  CBP components. We requested copies of CBP’s strategic or annual  plans for each of the seven Priority Trade Issues. We initially received  three plans, one of which was current and two that were outdated but still  being used by CBP. In addition, in February 2017 we received seven  Priority Trade Issue plans, of which one was final and six were still in draft  form. We reviewed and compared all plans we received against leading  practices for managing results, specifically those focused on performance  planning. These leading practices noted that a plan should identify goals  and measures covering each of its program activities and contain targets  to assess progress toward performance goals.

To examine the extent to which CBP meets its staffing needs for trade  enforcement, we reviewed CBP documents and reports related to trade  enforcement positions and staff levels, such as CBP’s Resource  Optimization Model. We obtained information on trade enforcement  staffing, budgeting, hiring process, and any challenges to hiring trade staff  by interviewing officials from the Office of Trade’s Resource Management  Division, the Office of Field Operations’ Human Capital and Budget  offices, the Enterprise Services’ Finance division, and the Minneapolis  Hiring Center. We also spoke to CBP officials in the field about the impact  of staffing shortfalls and challenges to meeting optimal staffing levels. We  requested copies of CBP staffing plans or strategies related to trade  enforcement positions and discussed with CBP officials whether they had  any hiring plans for trade positions. We reviewed leading practices in  human capital management, which indicated that agencies, through  strategic workforce planning, should address developing  long-term  strategies for acquiring, developing, and retaining staff to achieve  programmatic goals.

We requested staffing data covering fiscal years 2012-2016 for the trade  positions that carry out trade functions identified in CBP’s Resource  Optimization Model. Nine of the 15 trade positions were mandated in the  Homeland Security Act. To identify positions with staffing shortfalls, we  compared actual staffing data for the nine mandated trade positions  against the minimum staffing levels set in the Homeland Security Act. In  addition, we compared actual staffing data for fiscal years 2015 and 2016  to the optimal staffing levels identified in CBP’s Resource Optimization  Model. Although the Homeland Security Act also required CBP to  maintain minimum staffing levels for the associated support staff for the  nine mandated trade positions, we did not assess CBP’s ability to meet  these staffing targets because CBP officials could not provide any  information on these positions or the staffing levels in response to our  request for data. To identify staffing shortfalls for the model’s six  nonmandated trade positions, we compared the actual staffing data CBP  reported for these positions in October 2014 against optimal staffing levels identified in the Resource Optimization Model. While we asked for  the percentage of time spent on trade functions performed by staff in the  six nonmandated trade positions for fiscal years 2012-2016, CBP was  able to report data only for the end of fiscal year 2014 because it does not  track the actual staffing levels for these positions on an annual basis. We  did not independently  assess and validate the optimal staffing models’  ranges. To assess the reliability  of the actual staffing levels reported by  CBP, as of October 2014, for the six nonmandated trade positions we  compared and corroborated staffing information provided in CBP  reporting and spoke to CBP officials regarding the methodology used to  determine the actual staffing levels for these positions. On the basis of  the checks we performed, we determined these data to be sufficiently  reliable for the purposes of indicating the staffing levels for the  nonmandated positions. To assess the reliability of the staffing data for  fiscal years 2012-2016 for the nine mandated trade positions, we  compared and corroborated information provided by CBP with staffing  information in the Congressional Budget Justifications for that time period  and spoke to CBP officials regarding the processes they used to collect  and verify the staffing data. On the basis of the checks we performed, we  determined these data to be sufficiently reliable for the purposes of  comparing actual to mandated staffing levels.

To provide information on audits related to CBP’s trade enforcement and  the implementation status of any recommendations made in such audits,  we identified audits that (1) were published between fiscal years 2011  and 2016, (2) followed a professional auditing standard such as the  generally accepted government auditing standards (GAGAS), (3)  contained recommendations made to the Department of Homeland  Security (DHS) or CBP, and (4) were related to trade enforcement. To  identify these audits, we searched databases such as ProQuest, Lexis  Market and Industry News, and the National Technical Information  Service to include sources representing think tanks, academics, trade  industry, and government. We also searched the Department of  Homeland Security’s Office of Inspector General (DHS OIG)’s external  website and GAO’s internal database, the Engagement Results Phase.  By systematically narrowing down the search results from the DHS OIG  external website and GAO’s Engagement Results Phase, we identified  nine GAO audits and 15 DHS OIG reports that met our criteria. We  corroborated our DHS report searches with the DHS Office of Inspector  General. Based on our searches, we did not find that any other private or  nonprofit entities or government agencies had published trade  enforcement audits between fiscal years 2011 and 2016 that pertained to  trade enforcement, adhered to a professional auditing or inspection  standard, and contained recommendations addressed to CBP or DHS.

We obtained the status of GAO audit recommendations from GAO’s  external website and GAO’s Engagement Results Phase database, and  the status of DHS OIG audit recommendations from DHS OIG officials.  For both GAO and OIG reports, we only included trade-relevant  recommendations made out to CBP or DHS—136 recommendations out  of a total of 188 (33 out of 46 recommendations for GAO reports, 103 out  of 142 recommendations for OIG reports). The sources of these audits  and inspections varied; the sources for GAO and DHS OIG may have  been work initiated under agency authority, congressional mandates, or  congressional requests. Other sources of DHS OIG audits included  annually conducted independent auditors’ reports on CBP’s consolidated  financial statements or part of a series of audit, inspection, and special  reports prepared as part of DHS OIG’s oversight responsibilities to  promote economy, efficiency, and effectiveness within the department.

To analyze the content of the recommendations, we coded each  recommendation made in GAO and OIG audits by a topic that reflected  our reporting objectives, information in the Trade Facilitation and Trade  Enforcement Act of 2015 (the Act) related to GAO’s mandate, and/or  recurring themes and pre-existing topics identified in the audit reports. We  identified 13 topics in the recommendations made by the GAO and OIG  audits. Recommendation topics covering both the GAO and OIG audits  included: agriculture as well as targeting and cargo examination.  Recommendation topics unique to GAO audits included: antidumping and  countervailing duties and an “other” category that includes U.S.-Mexico  border wait times. Recommendation topics unique to OIG audits included:  bonds, bonded warehouses and foreign trade zones, drawback, entry  reports, in-bond program, obligations, staffing, and trade compliance  measurement. To ensure the consistency and accuracy of coding the  recommendations according to these topics, an independent verifier  coded some topics independently,  and a supervisor reviewed coding for  other selected recommendations.

We conducted the performance audit on which this report is based from  May 2016 to April 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with CBP in May 2017 to prepare this public version  of the original sensitive but unclassified report for public release. This  public version was also prepared in accordance with these standards.

section_title: Appendix III: Organizational Structure of U.S. Customs and Border Protection’s Office of Trade and Office of Field Operations
paragraphs: The Office of Trade is composed of six directorates (see fig. 12).

The Office of Field Operations is composed of seven directorates, each  with a number of divisions (see fig. 13).

section_title: Appendix IV: Status of U.S. Customs and Border Protection’s Seven Priority Trade Issue Plans
paragraphs: Table 11 provides a status of U.S. Customs and Border Protection’s  (CBP) strategic or annual plans by Priority Trade Issue, as of February  2017.

section_title: Appendix V: Comments from the Department of Homeland Security

section_title: Appendix VI: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Christine Broderick (Assistant  Director), Andrea Riba Miller (Analyst-in-Charge), Debbie Chung, Martin  De Alteriis, Neil Doherty, Joyce Kang, Grace Lui, and Edith Yuh made  significant contributions to this report.

Fast facts: Customs and Border Protection enforces customs and trade laws that protect the U.S. economy and the health and safety of the American people. CBP staff conduct trade enforcement activities at more than 300 ports by, among other things, collecting revenue, identifying noncompliant imports, and seizing prohibited goods, such as counterfeit drugs.

However, we found that CBP generally had not met the staffing levels set by Congress for trade positions and that these shortfalls could impact CBP’s ability to effectively enforce trade laws (e.g., fewer cargo inspections). We recommended that CBP develop a long-term hiring plan for trade positions.

Question-summary annotations: questions: question: How is U.S. trade law enforced?
answer: Two offices within U.S. Customs and Border Protection (CBP) enforce U.S. trade laws and protect revenue.
child_questions: question: How do the two offices differ from each other?
answer: The Office of Trade develops policies to guide CBP's trade enforcement efforts, while the Office of Field Operations conducts a range of trade processing and enforcement activities at U.S. ports.

question: How has CBP's approach shifted?
answer: CBP's previously port-centric approach to trade enforcement has shifted to a national-level, industry-focused approach with the establishment of the Office of Field Operations' 10 Centers of Excellence and Expertise.
child_questions: question: How do the Centers of Excellence and Expertise work?
answer: These Centers represent a shift in trade operations, centralizing the processing of certain imported goods on a national scale through a single Center rather than individual ports of entry.

questions: question: How are CBP's plans lacking?
answer: CBP conducts trade enforcement across seven high-risk issue areas using a risk-based approach, but its plans generally lack performance targets that would enable it to assess the effectiveness of its enforcement activities.
child_questions: question: Why are violations in the high-risk area so dangerous?
answer: Violations in the high-risk issue areas can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people.

question: How do CBP's enforcement activities reduce risk of noncompliance?
answer: CBP's trade enforcement activities reduce risk of noncompliance and focus efforts on high-risk imports, according to CBP. For example, CBP conducts targeting of goods, conducts audits and verifications of importers, seizes prohibited goods, collects duties, and assesses penalties.

question: Why can't CBP properly assess the effectiveness of its activities?
answer: However, CBP cannot assess the effectiveness of its activities without developing performance targets as suggested by leading practices for managing for results.

questions: question: How has CBP performed over the past 5 years?
answer: Over the past 5 fiscal years, CBP generally has not met the minimum staffing levels set by Congress for four of nine positions that perform customs revenue functions, and it generally has not met the optimal staffing level targets identified by the agency for these positions.
child_questions: question: How do staffing shortfalls impact CBP's ability to enforce trade?
answer: Staffing shortfalls can impact CBP's ability to enforce trade effectively, for example, by leading to reduced compliance audits and decreased cargo inspections, according to CBP officials.
child_questions: question: Why has CBP struggled with staffing levels?
answer: CBP cited several challenges to filling staffing gaps, including that hiring for trade positions is not an agency-wide priority.

question: How is CBP addressing the issue of staffing?
answer: Contrary to leading practices in human capital management, CBP has not articulated how it plans to reach its staffing targets for trade positions over the long term, generally conducting its hiring on an ad hoc basis.

questions: question: Why did GAO review CBP's effectiveness?
answer: In February 2016, Congress passed an Act that included a provision for GAO to review the effectiveness of CBP's trade enforcement activities.
child_questions: question: What topics are examined in this report?
answer: In this report, GAO examines (1) CBP's structure for carrying out trade enforcement , (2) how CBP conducts trade enforcement across its high-risk issue areas and ensures that its enforcement activities are effective, and (3) the extent to which CBP meets its staffing needs for trade enforcement.

question: How did GAO conduct research for this report?
answer: GAO reviewed agency documents, interviewed agency officials, and conducted field work at ports in Baltimore, Maryland; Los Angeles/Long Beach, California; and New York, New York.
child_questions: question: How did GAO select ports to visit?
answer: GAO selected ports to visit based on factors including volume of imports and number of trade enforcement units at each port.