FDA and FSIS must approve the release of the products they regulate before importers can distribute them in the domestic market. These agencies inspect products to ensure that they comply with U.S. food safety requirements. FDA electronically screened all 2.7 million entries of imported foods under its jurisdiction in fiscal year 1997 and physically inspected about 1.7 percent, or 46,000, of them. FSIS visually inspected all 118,000 entries of imported meat and poultry under its jurisdiction in calendar year 1997 and conducted physical examinations on about 20 percent of them. Importers must post bonds with Customs to allow them to move the shipment from the port. The bond amount is intended to cover any duties, taxes, and penalties. Importers generally obtain continuous bonds that provide coverage for multiple shipments over a specified time period. The amount of a continuous bond is based primarily on a percentage of duties paid in the previous year. Importers can also purchase bonds for single shipments (single-entry bonds) in an amount 3 times the declared value of the shipment. Once Customs reviews entry documents and verifies the bond, it conditionally releases the shipment to the importer. After the conditional release, FSIS and FDA exercise different controls over the shipment, according to their statutory and regulatory authorities. FSIS generally requires the importers of the products it regulates to deliver them to approved import inspection facilities for storage until the products are released or refused entry. If FSIS refuses entry, it notifies the importer, who must arrange for reexport, destruction, or conversion to animal food within 45 days. The shipment is not released from FSIS’ custody until the importer presents documents to FSIS showing that arrangements have been made. In contrast, under the Federal Food, Drug, and Cosmetics Act, as amended (FFDCA), importers are allowed to retain custody of food imports subject to FDA regulation in their own warehouses throughout the entire import process, from pick-up at the port of entry to release, destruction, or reexport. FDA releases most shipments without inspection. If FDA decides to examine a shipment, it asks the importer to make the shipment available for inspection at a place of the importer’s choosing. If FDA refuses to allow the shipment to enter the United States as a result of this inspection, it notifies Customs and the importer and gives the importer 90 days to reexport or destroy the refused shipment. FDA’s decision to refuse entry may occur immediately after inspection or may occur several days or weeks after a sample is collected, when laboratory results become available. If a shipment is not presented for inspection as requested by FDA or FSIS or is refused entry by FDA or FSIS, Customs is to notify the importer through a redelivery notice to (1) make the shipment available for FDA or FSIS inspection or (2) redeliver the refused shipment for Customs’ supervised reexport or destruction. Customs can penalize an importer that fails to (1) make a shipment available for inspection, (2) destroy or reexport a refused shipment within the time frame set out in the Customs redelivery notice, or (3) dispose of the shipment under Customs’ supervision. Customs initially assesses penalties at the maximum amount allowed—3 times the value of the shipment declared on the Customs entry form, up to the amount of available bond coverage. According to Customs’ guidelines, Customs must follow FDA’s penalty recommendation when an importer fails to redeliver a refused shipment for export or destruction. Customs may reduce the penalty when the shipment is returned (1) late but disposed of under Customs’ supervision or (2) on time but not disposed of under Customs’ supervision. According to Customs officials, they cannot impose penalties if Customs does not issue a redelivery notice to the importer within 120 days of the FDA refusal date. Weak and inconsistently applied controls have allowed some FDA-regulated imported foods that violate U.S. food safety requirements to enter domestic commerce. This occurs when either (1) importers circumvent required inspections or fail to properly dispose of shipments refused entry or (2) federal agencies do not work together to ensure that these shipments are disposed of properly. Although importers are subject to penalties for circumventing inspection and disposal orders, we found such penalties may not effectively deter violations because the penalties are too low and at times are not imposed at all and therefore fail to serve as a deterrent. Unscrupulous importers bypass FDA inspections of imported food shipments or circumvent requirements for reexporting or destroying food shipments that were refused entry, according to Customs and FDA officials at the ports we visited. This occurs, in large part, because, under FFDCA, importers are allowed to maintain custody of their shipments throughout the import process. Additionally, (1) FDA does not require shipments to have unique identifying marks that would aid in ensuring that other products are not substituted for those targeted for inspection or disposal and (2) importers, under FFDCA, are allowed a long period of time to redeliver refused shipments to Customs for disposal, which facilitates substitution by unscrupulous importers. Recognizing this problem, Customs has conducted and is still conducting operations at a number of ports to detect importers that attempt to circumvent inspection and disposal requirements. For example, in a San Francisco operation that started in October 1996 and was known as “Shark Fin,” Customs and FDA found that importers had diverted trucks en route to inspection stations so that suspect products could be substituted with acceptable products. According to Customs investigators, the operation revealed that six importers were sharing the same acceptable product when they had to present a shipment for inspection—a practice known as “banking.” In a follow-up operation in San Francisco, known as “Operation Bad Apple” and started in July 1997, Customs and FDA found a number of substitution and other problems, such as invoices that falsely identified the product. Customs’ concerns were further validated when this second operation found that 40 of the 131 importers investigated had import shipments with discrepancies, such as product substitution and false product identification. According to a Customs official, 10 of the importers were previously identified as suspicious, while the other 30 importers had been considered reliable until the investigation. Identifying the substitution of products prior to inspection is difficult and labor-intensive, according to FDA and Customs port officials. Because FDA-regulated imports do not have unique identification marks that associate a shipment with the import entry documents filed with Customs, extra efforts are required to identify substitution, such as marking or documenting the products at the port before they are released to the importer, then checking the products when they are presented for inspection. FDA and Customs officials believed that placing additional staff at the ports for such efforts, as in the San Francisco operations, could not be sustained as a normal practice, given the resources required and other priorities. Substitution problems have also occurred after inspections, when importers are ordered to redeliver refused shipments to the port for destruction or reexport. Three of the eight ports we reviewed routinely examined FDA-regulated shipments delivered for reexport or destruction to detect substitution, according to Customs and FDA officials. At two of these ports—New York and Blaine—Customs found that substitution had occurred on outbound shipments. For example, in New York, Customs instituted a procedure in 1997 to physically examine selected food shipments that were refused entry and were scheduled for reexport. Officials began this procedure after periodic examinations found that some importers had substituted garbage for the refused shipments that were being reexported. For the 9-month period of October 1, 1997, through June 30, 1998, Customs found discrepancies in 31 of the 105 FDA-refused shipments it examined. Nine of the discrepancies were for product substitution and 22 were for shortages—only part or none of the refused shipment was in the redelivered containers. For example, in one instance, the importer presented hoisin sauce for reexport that had a later production date than the date of the entry into the United States on the original refused shipment. Customs officials believed that the importer distributed the original refused shipment into domestic commerce and substituted the hoisin sauce to avoid detection and penalty. At the other five ports, Customs does not systematically examine the shipments delivered for disposal to detect substitution or only examines them for destruction. For example, at Laredo, Customs officials said they only review the documents provided by the importer and do not examine the shipment to verify that the products being reexported or destroyed are the same products that were refused entry. At Miami, Seattle, and Los Angeles, Customs or FDA officials may examine some products presented for destruction, but, as at the Laredo port, only review the documents provided by the importer to verify the export of refused shipments. At San Francisco, a Customs official told us that he reviews the paperwork on the refused shipment and the paperwork on the shipment presented for destruction or reexport. None of the five ports routinely physically examined the export shipments to ensure they contained the products that were refused entry and listed on the export documents. Customs officials told us they do not have enough time for inspectors to verify each shipment presented for destruction or reexport, given the number of refused shipments and other priorities. A number of factors contribute to FDA’s and Customs’ problems in ensuring that targeted shipments are actually inspected and that refused entries are properly disposed of. First, under FFDCA, importers are allowed to maintain custody of their shipments throughout the import process, thus providing importers with the opportunity to circumvent controls. Second, imported food shipments under FDA’s jurisdiction are not required to contain unique identification marks. As a result, it is difficult to verify whether the FDA-regulated shipments presented for inspection were the actual shipments being imported or whether refused shipments were destroyed or reexported. Furthermore, when FDA determines that a shipment is unsafe, FDA does not mark the shipment to show it was refused entry.