GAO finds Flaws in 232 Tariff Exclusions

Despite tariffs on imported steel and aluminum products under Section 232, companies can apply to Commerce to be excluded from paying these tariffs. Commerce then tells Customs and Border Protection how to administer approved exclusions.

Companies didn't use the majority of the exclusions, and CBP generally administered them as instructed. However, weaknesses in CBP's process allowed some exclusions to be used incorrectly. This resulted in $32 million in unpaid duties, as of November 2021.

GAO found that BIS and the Department of Homeland Security's Customs and Border Protection (CBP) had inconsistent data for about 5 percent of the nearly 207,000 exclusions approved through September 2021. BIS transfers data about approved exclusions to CBP for use in the Automated Commercial Environment (ACE), the system importers use to bring goods into the U.S. BIS provides CBP partial data about the parameters, which requires CBP to derive additional information, such as the exclusion's validity period, for use in ACE. Without a more consistent data transfer process, CBP faces challenges in administering exclusions as BIS intends, creating a continuing risk of error and invalid use.

GAO's analysis shows that importers generally used tariff exclusions consistent with BIS's approved parameters. However, GAO identified an estimated $32 million in unpaid duties resulting from invalid exclusion use as of November 2021.

CBP officials said that when they programmed the Section 232 functionality in ACE, they did not have the time or resources to program automatic deactivation once the importer reaches the approved quantity. Instead, CBP has manually deactivated exclusions.

However, the lag time between when importers reach approved quantities and CBP's manual deactivation allows importers to overclaim exclusions and not pay duties on the overage. Until CBP implements more effective controls to prevent overclaiming and to recover duties owed, the U.S. government is at risk of losing millions of dollars in revenue.

GAO is making four recommendations, for BIS to evaluate the results of the certification requirement and develop a more consistent data transfer process, and for CBP to implement controls to prevent overclaiming of exclusions and to recover duties owed. The agencies concurred with GAO's recommendations.