Financial Management

Control Weaknesses Limited Customs' Ability to Ensure That Duties Were Properly Assessed Gao ID: AIMD-94-38 March 7, 1994

GAO found significant weaknesses in the U.S. Customs Service's ability to ensure the assessment of duties, taxes, and fees on foreign goods imported into the United States. As a result, GAO cannot guarantee that the $20 billion in revenue collections that Customs reported for fiscal year 1992 represents all the money that should have been collected that year. Further, controls over duties for items later exported or destroyed were not adequate to prevent duplicate or excessive refunds. Such refunds totaled nearly half a billion dollars during fiscal year 1992. In addition, Customs did not have a reliable way of measuring overall compliance with trade laws to determine if it was maximizing the use of its inspection and enforcement resources. GAO recommends that Customs (1) adopt a strategy for inspecting cargo from both high- and low-risk carriers to ensure that all cargo is accurately and completely identified on manifests and entry documents and (2) require its district offices to keep perpetual inventory records of goods held in bonded warehouses and foreign trade zones that they oversee. GAO also suggests ways for Customs to improve its automated systems so that Customs can more effectively monitor the accuracy of entry documents, monitor activity related to goods held in warehouses and foreign trade zones, and validate drawback claims.

GAO found that: (1) Customs' internal controls did not provide reasonable assurance that all goods imported into the United States were properly identified and that the related duties were assessed; (2) Customs could not measure overall compliance with trade laws, since random inspections were not consistently performed; (3) Customs' controls over goods held in warehouses and foreign trade zones (FTZ) were weak; (4) Customs' controls over refunds were weak, since Customs did not have a practical means of maintaining data to ensure that such refunds were appropriate; and (5) in 1993, Customs began implementation of a new inspection program that would allow it to periodically assess the effectiveness of target inspections and other enforcement actions.


Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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