Summary
The U.S. Customs and Border Protection (CBP) must strive to balance its competing goals of facilitating trade, providing port security, and collecting trade revenues. CBP's in-bond system, which allows goods to transit the United States without formally entering U.S. commerce, must also balance these goals. In response to concerns that previously identified weaknesses in the in-bond system have not been remedied, GAO examined (1) the purpose of the in-bond system and the extent of its use (2) CBP efforts to ensure that revenues are collected and trade concerns are minimized, and (3) CBP efforts to ensure that security-related inspections are properly targeted. GAO examined audit reports and agency documents, interviewed officials at CBP headquarters and at 10 CBP port offices. GAO also discussed the in-bond system with trade groups impacted by the in-bond system.
The in-bond system is designed to facilitate the flow of trade; however, CBP does not know the extent of the in-bond system's use as a result of lax oversight. The system allows cargo to be transported from the arrival port, without appraisal or payment of duties, to another U.S. port for official entry into U.S. commerce or for exportation. Although the in-bond system is estimated to be widely used, CBP cannot assess the extent of program use because it collects little information on in-bond shipments and performs limited analysis of data that it does collect. Despite numerous program reviews and audits that identified problems in CBP's management of the in-bond system, weaknesses persist and continue to impede CBP's ability to ensure proper collection of trade revenue and management of trade risks. The major weakness is that CBP does not adequately monitor and track in-bond goods. In particular, it does not consistently reconcile in-bond documents issued at the arrival port with documents at the destination port to ensure that the cargo is either officially entered with appropriate duties or quotas applied, or is in fact exported. CBP records show that many in-bond cargo shipments remained unreconciled, or "open," with one port reporting that 77 percent of its in-bond transactions were open. Also, in-bond regulations provide unusual flexibility for the trade community, but create challenges for CBP in tracking movements. Finally, some CBP ports do not consistently perform in-bond compliance reviews which could identify weaknesses and possible solutions. The limited information available on in-bond cargo also impedes CBP efforts to manage security risks and ensure proper targeting of inspections. In-bond goods transit the United States with a security score based on manifest information and do not use more accurate and detailed entry type information to re-score until and unless the cargo enters U.S. commerce. As a result, some higher risk cargo may not be identified for inspection, and scarce inspection resources may be used for some lower risk cargo.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Loren Yager
Government Accountability Office: International Affairs and Trade
(202) 512-4347
Recommendations for Executive Action
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, for all in-bond goods to be eligible for a consumption entry into the United States, require additional information on the in-bond form (CBP Form 7512) at the time of arrival. This information should include data elements that provide a more precise description of the cargo and that further identify the entities involved in the movement of these goods. As part of this effort, CBP should--6 months after implementation of new data requirements--report to Congress whether the enhanced data obtained are adequate to address security and trade concerns for in-bond transactions or whether current CBP authority should be adjusted.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, for all goods to be exported, revise the in-bond form (CBP Form 7512) to include the six-digit code from the Harmonized Commodity Coding and Classification System (Harmonized System).
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, use information collected in the revised in-bond form to ensure that the new Automated Commercial Environment (ACE) system can generate reports useful to CBP management in making prioritized, risk-based management decisions related to revenue and security risks.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: Implemented
Comments: The implementation of ACS is a long-term ongoing process expected to be finalized by 2011. Before GAO made this recommendation, CBP was not considering incorporating enhanced reporting capability in ACE to manage the in-bond system. However, in response to our recommendation CBP reported that it plans to establish requirements for ACE that include enhanced report capabilities that enable program managers to exercise more effective oversight over the in-bond process
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, use information from the revised in-bond form as input to the Cargo Selectivity process at the arrival port instead of limiting this process to cargo that has made entry for consumption, to ensure that in-bond shipments are adequately tracked between the arrival and destination ports.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: Implemented
Comments: CBP explained that for technical reasons it is not possible to use the cargo selectivity functionality to improve tracking of in-bonds. Instead, it has addressed this recommendation by implementing a new security-filing proposal, commonly referred to as the "10 + 2," to obtain e-trade of advanced data for security and targeting purposes that will facilitate tracking in-bonds. The additional data will provide an enhanced informational profile of all imported cargo, including freight moved via in-bond procedures. Furthermore, the additional data (identifying the key parties to the transaction and the locations of specific events associated with the transaction) will also supplement the manifest filed by the carrier and enable CBP to make a more definitive risk assessment before the cargo is approved for transport to the port of entry. CBP believes the "10 + 2" security filing will address many of the security concerns raised relative to the limited information provided on in-bond form. In a report to congress, CBP reported that in addition to the new new security-filing process, ACE is being developed with improved tracking capabilities for all in-bonds in the system, as well as for tracking by carrier, with account-based tracking reports. ACE will allow for multi-modal tracking, which will allow CBP to better track cargo from beginning to end, including all in-bond transactions. Furthermore, Section 405 of the SAFE Port Act calls upon all federal agencies to participate in the International Trade Data System, which will also help with in-bond tracking because some cargo that currently moves in-bond is covered by specific regulations issued by other agencies and associated processes that may not be automated (e.g., paper permits). Having all federal import requirements automated through ACE will help ensure that all conditions of entry are satisfied before cargo can proceed to move under the in-bond process.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to collecting more detailed information on in-bond cargo, use information from the revised in-bond form to update Automated Targeting System (ATS) security scores for in-bond movements at the arrival port instead of delaying this process until after cargo has been transported through the United States to the destination port.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, conduct an analysis of the extent of use of the in-bond system and the patterns of shipments within the system.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, assess the systemic problems causing open in-bond transactions and impeding their identification and make adjustments to ACE and provide appropriate tools to eliminate these problems and improve the capacity of CBP officers, importers, and shipping agents to track and close open in-bond transactions.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, revise in-bond regulations to reduce the time allowed for transporting cargo and to limit the ability of carriers to change the final destination for cargo without CBP knowledge.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: Implemented
Comments: In May 2008, CBP?s working group developed proposed regulation changes to 19 CFR Part 18. These changes include (1) requiring importers to electronically notify CBP prior to diverting in-bond cargo to a new destination port and (2) reducing the transit period to 30-days for in-bond modes of transportation. The Assistant Commissioner of the Office of Field Operations submitted the working group's recommended regulation changes to CBP?s Office of International Trade for internal review and considered the changes to be a high priority for the Office of Field Operations. Per a teleconference on August 21, 2008, CBP officials (Director of Cargo Control) and (In-bond Program Manager, Cargo Control) told GAO that CBP?s Office of Rules and Regulations is currently reviewing the proposed regulation changes. The Director of Cargo Control was reluctant to estimate when the proposed rules would be made public, but estimated that Notice of Proposed Rulemaking (NPRM) would be published in the Federal Register within 6 to 8 months (e.g. around February or March 2009).
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, develop a more systematic enforcement strategy to increase bondholder compliance in closing out open in-bond transactions within required time frames.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, with respect to improving monitoring of cargo moving within the in-bond system, prioritize closing in-bond records for shipments with high potential risks of security, law enforcement, and revenue loss, using updated information from the in-bond form.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
Recommendation: To improve management of the in-bond program through better informed decisions affecting trade, revenue collection, and security goals, the Secretary of Homeland Security, acting through the CBP Commissioner, should, to make the in-bond compliance measurement program a more effective tool for monitoring compliance with in-bond regulations, ensure that the current compliance measurement program (Tinman) or any updated commercial compliance tool is consistently conducted by the ports so as to inform CBP national and port management of needed corrective actions.
Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security: Bureau of Customs and Border Protection
Status: In process
Comments: GAO is assessing agency actions to determine compliance.
