Identification, assessment and collection of Antidumping and Countervailing Duties (AD/CVD) continues to be a high enforcement priority for U.S. Customs and Border Protection (“CBP”). CBP reports that in FY 2015:
In addition, CBP conducted 92 audits of importers of AD/CVD commodities and identified $69 million in AD/CVD loss of revenue with $7 million collected to date. CBP also levied 18 monetary penalties totaling over $60 million on importers for fraud, gross negligence and negligence for AD/CVD violations under 19 U.S.C. § 1592 (including the assessment of $45.5 million in penalties for AD/CVD violations on importers of steel products).
CBP also carried out 28,783 entry summary reviews on potential AD/CVD violations and identified over $29 million in AD/CVD loss of revenue. The top AD/CVD violations identified were for tires, solar cells and pencils.
In comparison, in FY 2014 CBP collected $508.5 million in AD/CVD cash deposits, conducted 78 audits of importers of AD/CVD commodities, and identified $24.6 million AD/CVD discrepancies and collected $8.5 million.
(December 2014 AD/CVD Enforcement Updates: http://www.cbp.gov/trade/priority-issues/adcvd/outreach,
last visited on 3-8-2016)
Commodities involved in the audits include aluminum extrusions, bearings, candles, nails, lock washers, pencils, plastic bags, ribbons, shrimp, solar cells, steel pipe, tires, tissue paper, wooden bedroom furniture and wood flooring.
These statistics show not only CBP’s ongoing enforcement efforts, but that importers have a lot of work to do to increase their understanding of the AD/CVD process and how they can take steps to improve their compliance efforts to identify and properly report goods that are subject to AD/CVD duties.
Apart from outright fraud in the avoidance of payment of AD/CVD duties, importers frequently fail to identify goods at the time of importation as being subject to AD/CVD duties. This can occur for a multiple of reasons, including:
- A failure to perform the necessary due diligence as part of the procurement process to determine if goods to be imported are AD/CVD applicable prior to issuing a purchase order;
- The failure to properly classify goods at the time of entry and, therefore, missing the AD/CVD indicator for that tariff line item;
- A failure to recognize that the goods being imported are subject to the scope of an order (examples include aluminum extrusions, wooden bedroom furniture, candles and various steel products);
- Declaring the wrong country of origin (i.e., Taiwan or Canada vs. China); and
- Use of the incorrect deposit rate for the foreign exporter.
Importers can improve their compliance rate with AD/CVD duties and avoid potential penalties and back payments by implementing internal controls that focus on compliance with AD/CVD orders. Internal controls for compliance with AD/CVD orders include:
- Conducting periodic AD/CVD risk assessments to identify entries that are potentially subject to AD/CVD orders where no AD/CVD deposit was made at time of entry;
- Adoption of strong tariff classification internal control procedures to recognize when products are potentially subject to AD/CVD orders;
- Regular screening of tariff classifications for products that have AD/CVD indicators;
- Verification of country of origin for products that have tariff classifications with AD/CVD indicators;
- Verification of the correct deposit rate for the foreign exporter/manufacturer;
- Establishing clear instructions with brokers and entry filers against disclaiming goods as not subject to AD/CVD orders when the products are classified under tariff classifications without receiving instructions from the importer;
- Incorporating AD/CVD reviews in a robust post entry audit program; and
- Seeking a legal opinion or scope inquiry when there is doubt as to whether the goods in question are within the scope of an AD/CVD order.
While AD/CVD orders include the Harmonized Tariff Schedule (HTS) classification for goods subject to the scope of the order and investigation, this information is only provided for convenience and customs purposes. The written description of the scope is dispositive. Importers can identify products currently subject to AD/CVD Orders by checking various websites, including a listing by the Department of Commerce of Products currently subject to AD/CVD Orders, the U.S. International Trade Commission (ITC) webpage on Antidumping and Countervailing Duty Investigations and the CBP Automated Commercial Environment (ACE) report ES-105 ADCVD Active Case List (https://ace.cbp.dhs.gov/).
Importers can also take a number of steps to reduce potential AD/CVD liabilities by increasing their engagement in the AD/CVD process. This includes:
- Participating in the initial investigation and development of the scope of investigation and order. Frequently there is inadequate importer participation in the development of the scope that results in an overly broad or one-sided scope description;
- Seeking status for individual foreign exporters as a voluntary respondent to obtain individual AD/CVD deposit rates (commonly referred to as “Section A” rates);
- Seeking a formal scope ruling from the Department of Commerce when there is doubt as to whether the goods in question are within the scope of an AD/CVD order;
- Participating in the annual administrative review (AR) of an AD/CVD order;
- Seeking a “new shipper” review if the foreign exporter has not exported goods subject to the AD/CVD order in a previous period. A “new shipper” review will avoid the assessment of the “all-other rate” and establish an individual cash deposit rate that is often substantially lower than the “all-other rate”; and
- Seeking a Changed Circumstances Review (CCR).
While the annual administrative review is used to calculate assessment rates and new cash deposit rates based on a period of sales subsequent to the investigation, a CCR addresses questions about the applicability of the order. For example, “no interest revocations,” where partial or total revocation of the order is warranted because domestic parties are no longer interested in covering certain products. CCRs may also address the applicability of cash deposit and assessment rates after there have been changes in the structure of a respondent, such as a merger or “successor-in-interest,” or “successorship,” determinations.
If you have questions about this or other international trade matters, please contact George Tuttle, III, at firstname.lastname@example.org or at (415) 986-8780.
Cindy DeLeon, Senior Trade Auditor, with Deleon Trade, contributed to the writing of this article. For further information about Ms. DeLeon and Deleon Trade, you can visit Deleon-Trade.com. Thank you, Cindy.
George R. Tuttle, III, is an attorney with the Law Offices of George R. Tuttle in the San Francisco Bay Area.
The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.
Copyright © 2016 by Tuttle Law Offices.
All rights reserved. Information has been obtained from sources believed to be reliable. However, because of the possibility of human or mechanical error by our offices or by others, we do not guarantee the accuracy, adequacy, or completeness of any information and are not responsible for any errors, omissions, or for the results obtained from the use of such information.
Tuttle Law Offices
San Francisco Bay Area
1100 Larkspur Landing Circle, Ste 385
Larkspur, CA 94939