U.S. GOVERNMENT ACCOUNTABILITY OFFICE (GAO) REPORT ON BYRD AMENDMENT EXPOSES FLAWS IN TRADE LAW

One Company and Its Subsidiaries Receive 40% of $1 Billion in Byrd Amendment Payouts

Washington, DC — The Government Accountability Office (GAO) today released the results of a comprehensive year-long review of the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA) or "Byrd Amendment," concluding that the law has benefited a handful of large companies and that accountability for the accuracy of the almost $2 trillion in claims is "virtually non-existent." The GAO concluded that the Byrd Amendment "undermines the effectiveness of trade remedies generally."

The GAO report was in response to an April 2004 request by Rep. Clay Shaw (R-FL), Chairman of the House Ways and Means Subcommittee on Trade, and Rep. James Ramstad (R-MN) and other U.S. Members of Congress who asked the GAO to carry out a comprehensive review of the Byrd Amendment, a law which funnels all money collected by the government from import duties to companies that petitioned for those duties or supported the petition, with no strings attached. To date, the U.S. Government has paid more than $1 billion directly to these petitioning companies.

In the report, the GAO concludes that more than $1 billion of Byrd funds have been disbursed to a small number of U.S. companies with "mixed effects," with one company, the Timken Company and its subsidiaries (The Torrington Company and MPB Corporation), receiving 40% of total disbursements, or $395 million — nearly equivalent to the total amount received by 731 other companies during FY2001 — FY2004. The other top Byrd recipient includes Candle-lite ($56 million). In addition, the GAO report revealed that two-thirds of all Byrd payments went to only three industries, including bearings, candles, and steel.

In a press release issued by the Committee on Ways and Means (9/26), Chairman Bill Thomas (R-CA) stated, "the GAO report provides objective analysis regarding the ineffective operation of the CDSOA and the extreme misuse of taxpayer dollars." Trade Subcommittee Chairman Clay Shaw also said that the CDSOA has created a "Millionaires" Club of very few corporations which receive tens to hundreds of millions of dollars." As Senator Chuck Grassley (R-IA) stated: "The CDSOA lines corporate coffers for a select few, and too many innocent companies and workers end up paying the tab. We need to end this unfair subsidization as soon as possible."

"The GAO report is further evidence that Congress needs to act now to repeal the Byrd Amendment," said Steve Alexander, Executive Director of CITAC and President of the CMR Group, a Washington D.C.-based lobbying firm. "The report provides overwhelming evidence that the Byrd Amendment has turned into a giant corporate welfare program where a few large companies are reaping millions of dollars in subsidies based on overstated and unaudited 'qualifying expenditures.’ This law simply fails to serve the public good and it needs to go."

The report concluded that accountability for the accuracy of claims for Byrd Amendment money is "virtually non-existent" and noted that companies making the largest claims generally receive the largest payments. An incentive is created for producers to claim as many expenses as possible as "qualified expenditures" relative to other producers so that their share of the funds available under a duty order is as large as possible. Only one company of the 770 companies that have received money under the program has been audited, with the audit showing that the expenses claimed by the company were substantially overstated.

In FY2004, qualifying expenditures were listed at almost $2 trillion and the program is facing a 10-fold increase in its claim processing, from 1,960 claims (FY2004) to almost 30,000 claims (FY2005). The $2 trillion in claims is equal to approximately 17% of the country's total GDP.

The GAO report also describes the lack of restrictions on the recipients' use of Byrd Amendment monies. For example, it notes that several companies "paid off long-standing company and personal debts." And in one case, the head of a small family-run company claimed to have paid off mortgages on his plant and his residence.

On the other hand, the GAO report found that Byrd Amendment payments put some U.S. producers (the recipients of Byrd money) at a competitive advantage over other U.S. producers (those companies who did not formally and publicly support a trade case and are therefore not eligible to receive Byrd Amendment money). The GAO report revealed that many non-recipients of Byrd Amendment money, especially in crawfish, candles, bearings and pasta, report that disbursements to competitors were having negative effects on them. Pasta non-recipients claim that the funds have created an uneven playing field and decreased their ability to compete in the marketplace. Non-recipients in the steel industry viewed the application of the law unfair and one non-recipient in bearings described how the company was forced to subsidize competitors through the Byrd Amendment.

Lewis Leibowitz, CITAC General Counsel and a partner at Hogan & Hartson, LLP, said, "This report demonstrates the distorted nature of the Byrd Amendment. Far from assisting American manufacturing, the Byrd Amendment actually undermines it and does unforeseen injury to American companies. It is not a trade remedy meant to "balance the playing field." It is Robin Hood in reverse: the biggest and wealthiest companies are rewarded the most money."

The World Trade Organization (WTO) ruled in 2002 that the Byrd Amendment violates U.S. trade obligations. Congress' failure to repeal the law has resulted in WTO-authorized retaliation against U.S. exports by Canada, the European Union, Japan and Mexico on products including baby formula, oysters, wine, dairy products, candy and chewing gum. Total retaliatory tariffs from these countries are approximately $114 million. However, approximately $3.7 billion is being held by U.S. customs in duties assessed against Canadian softwood lumber. Should these duties be distributed as Byrd payments, the level of Canada's retaliation would skyrocket.

Click here to view the International Trade: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act. GAO-05-979, September 26, 2005.

CITAC is a coalition of companies and organizations committed to promoting a trade arena where U.S. consuming industries and their workers have access to global markets for imports that enhance the international competitiveness of American firms. CITAC supports House Resolution 1121, a measure to repeal the Byrd Amendment.

CITAC is a coalition of companies and organizations committed to promoting a trade arena where U.S. consuming industries and their workers have access to global markets for imports that enhance the international competitiveness of American firms.

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