Enhanced CBP Investigative Authority Targets AD/CVD Evasion
Failure to Declare and Pay May Result in Considerable Costs
By Wallace Gable, GTM Governance, United States Livingston International
This article was originally published on March 7, 2017 in Global Trade Magazine
If you import into the United States, now is the time to re-evaluate your procedures on anti-dumping and countervailing duties (AD/CVD). U.S. Customs and Border Protection (CBP) is gearing-up to implement a new enforcement authority under the Trade Facilitation and Enforcement Act (TFTEA) that may be very costly to importers who aren’t taking steps to determine if the goods they import are subject to AD/CVD. The focus of the initiative is evasion of these duties. Failure to declare and pay them for any reason – including lack of knowledge or a mistaken belief – may result in considerable costs in owed AD/CVD and potential penalties assessed by CBP.
It’s always been the importer’s responsibility to determine if goods are subject to AD/CVD, but in light of the new enforcement authority granted to CBP by the “Trade Facilitation and Enforcement Act of 2015” (TFTEA)1; and the U.S. Department of Commerce’s announcement establishing the “Advisory Council on Trade Enforcement and Compliance” (ACTEC), which also has an AD/CVD enforcement component, importers are on notice that AD/CVD will receive even more scrutiny than it has in the past.
Evasion of AD/CVD has been a concern for as long as these trade remedies have existed.2 These duties are usually a percentage of the value of the goods and, although the rates vary widely, they can approach or exceed 100% of the goods’ value. CBP reports that, in fiscal year 2016, it levied thirteen monetary penalties totaling over $30.6 million against importers for AD/CVD violations involving fraud, gross negligence, or negligence. Additionally, CBP and U.S. Immigration and Customs Enforcement (ICE) seized sixteen shipments with a domestic value of more than $5.3 million for AD/CVD violations.
There are a number of ways evasion is attempted, including: declaring a false country of origin by means of fraudulent markings and/or shipping documents, and misrepresenting the product’s physical characteristics to give the appearance the goods are not within the scope of an Order.
Although enforcement of AD/CVD regulations is a long-standing CBP priority trade initiative, Title IV of the TFTEA, entitled “Prevention of Evasion of Antidumping and Countervailing Duty Orders”, requires establishing procedures for investigating claims of AD/CVD evasion. Interim regulations3 published by CBP in the Federal Register4 on August 22, 2016 were effective on that date. Any comments received on the interim regulations by the October 21, 2016 deadline will be considered before CBP publishes the final regulations; however, it is expected the regulations will be adopted without substantive amendment.
In order to implement its new authority, CBP has established the Trade Remedy Law Enforcement Directorate (TRLED) to conduct investigations into allegations of AD/CVD evasion. CBP notes that the existing e-Allegations system will also be enhanced to include an option enabling the general public and other Federal agencies to file evasion allegations under Title IV of the TFTEA.
What should be done to prepare for these new regulations?
Importers should review their policies and processes for ensuring the origin of goods they import is properly declared and, if applicable, that anti-dumping and/or countervailing duties are paid. Since importers are ultimately responsible for these duties, it is imperative that they know their suppliers, and have definitive and documented knowledge of where the goods are made. Visits to foreign suppliers’ facilities to document production is also recommended. Importer’s employees involved in customs, purchasing, and logistics functions need to be knowledgeable about AD/CVD and exercise reasonable care in determining whether any AD/CVD orders apply to imported goods.
1 Signed into law by President Obama February 24, 2016. (Public Law 114-125)
2 Title VII of the Tariff Act of 1930, as amended: Sub-title A (countervailing duties) added by the Trade Agreements Act of 1979 (19 U.S.C. 1671 et seq.); Sub-title B (anti-dumping duties) added by the Trade Agreement Act of 1979 (19 U.S.C. 1673 et seq.)
3 19 CFR Part 165
4 Federal Register Volume 81, No. 162, pages 56477-56490