U.S. Customs and Border Protection (CBP) assesses duties on inbound international mail arriving at the U.S. Postal Service’s five International Service Centers (ISC) in New York, Chicago, Los Angeles, San Francisco, and Miami; the gateway exchange office in Honolulu and at International Mail Facilities in San Juan, St. Thomas, and Newark. This mail is known as dutiable mail.
In addition to the duties levied, CBP charges a $5.50 processing fee and the Postal Service charges a $6.00 handling fee per item. Postal Service delivery unit employees must collect these duties and fees from the addressee once the dutiable mail is delivered. Accounting Services remits the collected duties and fees to CBP monthly.
When delivery unit employees are unable to deliver a dutiable item, they are required to complete the appropriate forms and submit them to CBP so it does not charge the Postal Service for the uncollected amount. Additionally, the Postal Service must return undeliverable dutiable items to the sender. Our objective is to assess the effectiveness of the Postal Service process for handling Customs duties and fees.
What the OIG Found
The Postal Service process for handling CBP duties and fees is not effective. We conducted on-site observations at the Los Angeles ISC and five delivery units in the Los Angeles District. In addition, we reviewed the reconciliation process at the Accounting Services Center in Eagan, MN, and analyzed expense data related to duties and fees, We found that during fiscal year (FY) 2015, the Postal Service did not collect about $1.2 million of $2.3 million (or 55 percent) in CBP-assessed duties and processing fees. Specifically, Postal Service employees at all five delivery units visited did not handle dutiable mail as accountable items for collecting the required duties and processing fees on delivery or report undeliverable items to CBP.
As a result, the Postal Service was billed for CBP duties and processing fees. This occurred because delivery unit employees were not familiar with policies and procedures for handling dutiable items and reporting undeliverable items due to lack of training and management oversight. Consequently, the Postal Service incurred unnecessary expenses of about $1.33 million in FY 2014 and $1.23 million in FY 2015. It could also have a cost avoidance averaging about $1.43 million annually in CBP-assessed duties and fees over the next 5 years by improving controls over dutiable items.
What the OIG Recommended
We recommended the vice president, Delivery Operations, direct delivery unit management to provide periodic training to employees on existing policies and procedures for effectively collecting duties and fees and reporting undeliverable items to CBP.