GAO, DHS Inspector General Criticize Drawback Program

The Government Accountability Office and the Department of Homeland Security Inspector General each released a report on Dec. 17 that noted various issues within CBP's drawback program. The GAO's report suggested that CBP work to flag excessive export submissions and “establish a reliable system of record for proof of export,” among other things. The DHS IG report found that CBP “lacked appropriate documentation retention periods to ensure importers and claimants maintained support for drawback transactions” and didn't scrutinize prior drawback claims enough for claimants during 2011 to 2018.

The GAO report was addressed to the Senate Finance and House Ways and Means leadership. “To examine the extent to which modernization affects drawback refund eligibility and CBP’s management of its workload, we reviewed relevant documents to identify and describe expansions and limitations to drawback refund eligibility that resulted from amendments made to the drawback statute” by the Trade Facilitation and Trade Enforcement Act, it said. The TFTEA changes “along with certain limitations in CBP’s Automated Commercial Environment (ACE), have led to an increase in the workload of drawback specialists,” the GAO said. “However, CBP did not anticipate the increased workload and does not have a plan to manage the increased workload, which has caused delays resulting in uncertainty for industry -- potentially impeding trade.“

CBP is also lacking “effective automated controls to prevent overpayment of drawback refunds related to export information,” the GAO said. The current review process “does not have the ability to systematically confirm the validity of export documentation and confirm that export documentation is accurately being used across multiple claims,” the GAO said. As a result, “drawback claims continue to be at risk of improper payments with vulnerabilities in CBP’s export verification and quality control system.”

CBP said it concurred with the GAO's findings and is working to implement the recommendations. For example, the CBP Office of Trade is looking at “alternatives to track duplicate exports across multiple drawback claims.” The agency also said it has determined that the Automated Export System is not sufficient alone “as an electronic means of establishing proof of export” and that CBP is working to develop a plan “for the use of AES (and possibly other systems)” for proof of export. Also planned is increased risk targeting of drawback claims, it said. The Treasury Department was also given a copy of the report, but didn't respond, the GAO said.

Meanwhile, the DHS IG faulted CBP for its drawback documentation retention periods. The IG also said that the legacy Automated Commercial System lacked the automated controls to stop excessive drawback claims. “The system did not have the capability to compare, verify, and track essential information about drawback claims related to underlying consumption entries and export documentation” and “CBP may be subject to financial loss due to excessive drawback claims,“ the IG said. CBP told the IG that it would work to address the issues, but also said it was “concerned that several statements in the draft report do not accurately reflect the current state of the drawback program.”