Bond Automation Necessary to Help Reduce CBP AD/CV Litigation, Says DiNucci in Testimony
The automation of the bond application and approval process would likely limit the risk of litigation with CBP and aid the agency in collecting bonds on unpaid antidumping and countervailing duties (AD/CVD), said government officials at a July 16 Senate Appropriations Homeland Security Subcommittee hearing held on trade enforcement. The U.S. government is owed an estimated $2.3 billion in unpaid duties, accumulated over more than 20 years, said Rich DiNucci, Acting Assistant Commissioner for the CBP Office of International Trade, at the hearing. Nearly half of that figure has been protested at some point during that time period, and CBP denied 84 percent of those protests, DiNucci added.
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Automation will allow CBP to better track the bonds and add clarity as to whether the bonds are processed in accordance with regulations, said DiNucci. “A lot of times if the surety is not convinced the bond was executed properly, they’ll challenge it in court,” he added. “Then we’ll wind up in litigation. Now bonds get executed in variety of fashions. One of the things that we would certainly, you know, thank you for specifically is assistance in helping us to automate that process.”
The bond issuers also routinely fail to accurately identify shell companies, and opt not to require the companies to deposit collateral, said witness Joe Sanroma, executive committee member at the American Honey Producers Association. Estimates suggest CBP is currently holding $600 million in new shipper bonds as security against unpaid AD duties on Chinese garlic, honey, crawfish and preserved mushrooms imports, said Sanroma. “Customs currently is attempting to recover $80 million from the insurance companies through 30 lawsuits,” he said. “Rather than pay Customs as promised the insurance companies are driving out those lawsuits by raising many empty defenses.” Chinese imports account for by far the highest number of unpaid AD duties and unrecovered bonds, said the private sector witnesses.
The bond process must be also improved through strengthened disclosures and broader transparency, said witness John Steinberger, a trade enforcement lawyer at Adduci, Mastriani. CBP withholds shipment details, such as container numbers, from the public and therefore inhibits lawyers from scrutinizing import behavior, said Steinberger. Moreover, CBP should add more industry members, rather than importers, to the Commercial Operations Advisory Committee Trade Enforcement and Revenue Collection Subcommittee in order to allow increased pressure on the need to address failed bond collection, said Edward Hayes, partner at Leake & Andersson. Hayes called the use of new shipper bonds for imports from China the “primary” reason for the CBP failure to collect bonds and said cash deposit requirements would eliminate the use of shell companies, said Hayes.
Despite the ongoing limitations, the agencies involved continue efforts to improve trade enforcement. ICE is cracking down on intellectual property rights violations and other evasions and has reached unprecedented levels of investigations and arrests in recent years, said Assistant Director of International Affairs at ICE Lev Kubiak. CBP is ramping up its collaboration with the Centers for Excellence and Expertise to increase its intelligence gathering capabilities and modernize its relationship with industry, said DiNucci. -- Brian Dabbs