Issue 248, February 15, 2000
The General Accounting Office (GAO) has issued a lengthy report to Congress which reviews the various programs and initiatives that Customs has been pursuing since the passage of the Mod Act in 1993 and has concluded that Customs has not reached many of its goals in improving compliance rates in the primary focus industries. The primary focus industries are agriculture, automotive, critical components (bearings and fasteners), communications, footwear, production equipment, steel, textiles and wearing apparel and mass merchandisers. Chemical and semiconductor devices are on the "watch" list.

Among the finding of the GAO are that revenue collections rates have decreased from 99.3% in 1995 to 98.35% in fiscal year 1998, resulting in an increase in the underpayment of duty from $135 million in 1995 to $345 million in 1998. The GAO report also found that compliance rates had gone down significantly in some primary focus industry sectors, such as the automotive sector, where the compliance rate decreased from 97 percent in 1997 to 87 percent in 1998. The compliance rate for bearings decreased from 86 percent in 1997 to 82 percent in 1998.

The GAO report also determined that the Customs Service had not met its goals for completion of Compliance Assessment (CAT) Reviews for each year. Customs had originally expected to complete 210 to 263 CAT reviews each year, covering a total of 2100 importers in 8 to 10 years. Through March, 1999, however, Customs had only completed 209 CATs and initiated 164 others. The GAO found that the median time for completion of a CAT review is 14 months.

The Account Manager Program also came under criticism by the GAO. According to the GAO, Customs identified 7,405 importers as candidates for account management, but only 604 have been assigned account managers. The GAO also concluded that much of the failure to achieve Customs' goals as originally targeted after passage of the Mod Act was due to serious understaffing, which hampers its compliance enforcement efforts. The GAO strongly recommended more funding to permit Customs to meet its goals. Finally, the GAO reported favorably on the recent restructuring of the CAT reviews which are intended to shorten the length of time to complete the reviews, and otherwise streamline the reviews.

How will Customs react to the criticism expressed by the GAO in its report? Only time will tell, however, the report clearly encourages many in Customs to vigorously pursue the "enforced compliance" programs that were put into full gear about a year and a half ago.

Our contributing writer, Sandra Liss Friedman, is a Partner in the Customs and international trade firm of Barnes, Richardson & Colburn in New York and can be reached via email or at (212) 725-0200.

Please note that due to the complex nature of the subject matter, AEI cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with AEI.