Enhanced Enforcement of Antidumping and Countervailing Duties, New Petitions

This is an old blog we lost during our transfer of site hosting. Update on this topic is forthcoming in a future blog.

  1. Executive Orders

President Trump issued two Executive Orders on March 31, 2017, signaling the new administration’s opposition to unfair trade practices. The first Executive Order (See Original Document Here) directs the Department of Commerce (“DOC”) and the United States Trade Representative (“USTR”) to conduct a broad review of differential tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights, and labor standards, etc. The second Executive Order (See Original Document Here) aims at the collection of antidumping and countervailing duties. Both address enforcement of violations of U.S. trade laws.

The U.S. estimates that uncollected AD/CVD duties for 2015 reached $2.3 billion. CBP is directed to develop a plan requiring “covered importers” of subject merchandise who pose a risk to the revenue of the United States to provide security through a bond or other legal measure. “Covered importers” are defined as new importers or importers for which the agency has a record of incomplete or late payment of antidumping or countervailing duties. Those benefiting from low bonds should be careful now to ensure timely and sufficient payment of the AD/CVD duties or otherwise be subject to the increased bond requirements.

CBP must “develop and implement a strategy and plan for combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise entering through any mode of transportation.” What “methods of interdiction and disposal other than seizure” means is unknown.

Regarding the protection of intellectual property rights at the border, now the government will share with right holders, to the extent permitted by law, information necessary to determine whether there has been an IPR infringement and information regarding merchandise that has been abandoned before a seizure. Previously that “commercial proprietary information” was withheld. The change may allow right holders to sue infringers in U.S. courts or to seek exclusion orders from the International Trade Commission.

The Department of Justice (“DOJ”) must “allocate appropriate resources to ensure that Federal prosecutors accord a high priority to prosecuting significant offenses related to violations of trade laws.”  Normally, U.S. trade enforcement attorneys who deal with penalty cases are in the Civil Division at DOJ and are not called “prosecutors.” It seems that the Executive Order refers to a prosecution of criminal violations.  As we know, federal laws impose criminal sanctions on a wide spectrum of illegal activities, such as fraudulent and/or knowing importation (or facilitation of such importation) of counterfeit merchandise or merchandise whose importation is “contrary to law,” false claims for refund of duties, false classification, false statements, smuggling, etc. We may see more prosecutions of individuals for trade-related cases.

  1. Recent AD/CVD Development

AD/CVD cases had already increased under the Obama Administration. In Fiscal Year (FY) 2016, $14 billion in imports were subject to AD/CVD, and CBP collected $1.5 billion in AD/CVD cash deposits.  CBP’s collection of AD/CVD cash deposits increased over 25 percent since FY 2015 and by almost 200 percent since FY 2014.  As of the end of FY 2016, $2.8 billion of AD/CVD duties were owed to the U.S. government for imports going back to 2001. With the new emphasis on combating unfair trade practices, we can expect to see continued AD/CVD cases during the Trump Administration.

Below are highlights of recent new AD/CVD petitions:

  • April 19, alleging that cold-drawn mechanical tubing from China, Germany, India, Italy, Korea, and Switzerland is sold at less than fair value in the U.S. market and that such goods from China and India are benefitting from countervailable subsidies. The petition alleges dumping margins of 88.82 percent to 188.88 percent for China, 70.53 percent to 148.32 percent for Germany, 25.48 percent for India, 37.23 percent to 69.13 percent for Italy, 12.14 percent to 48.61 percent for Korea, and 40.53 percent to 115.21 percent for Switzerland. (Scope of Investigation Can Be Seen Here).
  • April 11 alleging that metal tool chests and cabinets with drawers from China and Vietnam are sold at less than fair value in the U.S. market and that such goods from China are benefitting from countervailable subsidies. The petition alleges dumping margins of 167.5 percent for China and 58.2 percent for Vietnam. (Scope of Investigation Can Be Seen Here).
  • March 31 alleging that carton-closing staples from China are sold at less than fair value in the U.S. market. The petition alleges dumping margins ranging from 15.8 percent to 148.8 percent. (Scope of Investigation Can Be Seen Here).
  • March 28 alleging that carbon and alloy steel wire rod from Belarus, Italy, Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates, and the United Kingdom is sold at less than fair value in the U.S. market and that CASWR from Italy and Turkey is benefitting from countervailable subsidies. The petition alleges dumping margins of 179.07 percent to 304.94 percent for Belarus, 26.36 percent for Italy, 41.72 percent to 53.09 percent for Korea, 216.50 percent to 821.40 percent for Russia, 159.35 percent to 164.08 percent for South Africa, 32.64 percent for Spain, 45.1 percent for Turkey, 21.64 percent to 61.64 percent for Ukraine, 69.57 percent for the UAE, and 88.25 percent for the UK. (Scope of Investigation Can Be Seen Here).
  • March 23 alleging that biodiesel from Argentina and Indonesia is sold at less than fair value in the U.S. market and/or benefitting from countervailable subsidies. The petition alleges numerous subsidy programs in each country as well as dumping margins of 23.3 percent for Argentina and 34.0 percent for Indonesia. (Scope of Investigation Can Be Seen Here).
  • Aluminum Trade Enforcement Working Group filed a petition on March 9, alleging that aluminum foil from China is being sold at less than fair value in the U.S. market and/or benefitting from countervailable subsidies. The alleged dumping margins range from 37.57 percent to 134.33 percent. (Scope of Investigation Can Be Seen Here).
  • March 7 alleging that silicon metal from Australia, Brazil, Kazakhstan, and Norway is sold at less than fair value in the U.S. market and/or benefiting from countervailable subsidies. The alleged dumping margins are as high as 52.81 percent for Australia, 134.92 percent for Brazil, and 45.66 percent for Norway. The petitioners have also identified several programs in Australia, Brazil, and Kazakhstan as providing unfair subsidies. (Scope of Investigation Can Be Seen Here).

Some other trade remedy cases:

  • A Section 201 Petition was filed with USITC for global safeguard relief from imports of crystalline silicon photovoltaic (“CSPV”) cells and modules. Under Section 201 of the Trade Act, domestic industries seriously injured or threatened with serious injury by increased imports may petition the USITC for import relief. The USITC determines whether an article is being imported in such increased quantities that it is a substantial cause of serious injury, or threat thereof, to the U.S. industry producing an article like or directly competitive with the imported article. If the Commission makes an affirmative determination, it recommends to the President relief that would prevent or remedy the injury and facilitate industry adjustment to import competition. The President makes the final decision whether to provide relief and the amount of relief. Section 201 investigations do not require a finding of an unfair trade practice such as under the antidumping and countervailing duty laws. In this case the petitioner is seeking the following.
    • an additional tariff starting at $0.40/watt per CSPV cell and falling incrementally to $0.33/watt in year four
    • a minimum price starting at $0.78/watt per module and falling incrementally to $0.68/watt in year four
    • a new economic investment development program funded with the safeguard tariffs
    • an equitable distribution of AD and CV duties collected in two existing AD/CV cases
    • bilateral and multilateral negotiations to reduce global excess capacity

Some of these measures would likely be in violation of U.S. obligations as a member of the World Trade Organization.

  1. Concerns for Your Business

Expanded AD/CVD enforcement can have widespread and varied effects depending on your company’s position in the market.  If you are a domestic manufacturer who suffers from unfair trade competition, going forward you may find it easier to file AD/CVD petitions with increased likelihood of success.  If you are a U.S. importer, you should scrutinize your supply chain, making sure the products you import are not subject to the AD/CVD orders or if they are, paying adequate cash deposits. If you are a foreign manufacturer and/or producer exporting subject products to the United States, you may want to participate in the investigation or reviews, so you may be qualified for a lower rate.  We can help in each case, should you so desire.

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U.S. CBP New Regulations

This is an old blog we lost during our transfer of site hosting. Update on this topic is forthcoming in a future blog.

When foreign manufacturers sell below the cost of production or “fair market value”, it is known as “dumping.”  Dumping is a worldwide issue and phenomenon.  Every country and trade block, and virtually every major multinational and/or trade union is claiming “foul” with regard to some competitor.   The U.S. attempts to offset any gap in pricing by applying a duty specifically calculated, case by case, to increase the selling price to our evaluated fair market value. Countervailing duties involve a similar issue, arising when a foreign government provides benefits such as tax incentives to exporting companies.  Countervailing duties are adjusted to fit each country’s specific policies, while dumping is calculated per shipment. Because of the need for clarity with ever-changing cost, incentive, rates and duties, U.S. Customs and Border Protection has published new procedures for claim investigations dealing with the evasion of antidumping (“AD”) and countervailing (“CV”) duties as follows.  The purpose is to create additional avenues for spurring investigations of the preceding potential issues.   These are double-edged swords: opportunities for U.S. companies and additional risks for overseas entities.   We are always glad to advise from either perspective.

The Changes

  • Scope and purpose of the interim regulations: These regulations intend to clarify deadlines and procedures that Customs and Border Protection (“CBP”) must follow during the investigation of an alleged “evasion” of payment by an importer of product subject to AD or CV duties. Evasion is defined as the act by which “any amount of applicable antidumping or countervailing duties [is either] reduced or not being applied with respect to the covered merchandise.” Before the new standards were published, CBP was already authorized to handle AD and CV duty evasion through administering penalties for fraud or negligence. However, prior to the new procedures, if a private party submitted evasion allegations then they themselves did not have the benefit of formal investigative procedures.
  • Process for triggering an investigation: In order to trigger an investigation, the interim regulations give “interested parties” and federal agencies the ability to formally ask that CBP look into an alleged evasion. The regulations specify that an “interested party” refers to manufacturers, producers, exporters, or importers of the merchandise at issue based in the U.S. and overseas. Trade associations and unions comprised of these groups are also able to issue an investigation suggestion.
  • Initiation and notification of investigations ? and possible use of “interim measures”: Once the CPB receives a formal request from either a federal agency or “interested party,” they must evaluate the claim. If they find that the request “reasonably suggests” that the accused importer’s merchandise came into the U.S. through evasion, the CBP will open an investigation. The interim regulations allow CBP to take interim measures where it has a “reasonable suspicion” that the accused importer is evading an AD or CV order. These measures include the suspension of liquidation of the importer’s entries, requiring them to secure a single transaction bond, and ordering that they post a deposit in cash.
  • Creation of administrative record and possible use of adverse facts: Thanks to the interim regulations, CBP is now required to maintain an administrative record with all information it relied upon during the course of its investigation. When CBP is gathering information on an investigation, questionnaires and written correspondence with the parties will be the general methods used. The only material CBP is allowed to use during their assessment of fault is that which has been properly filed with respect to the new regulations. If a party does not cooperate with a CBP information request, then they may be subject to adverse inferences based off of the facts available. The regulations still stand in this situation, as only the information on file may be used pertaining to a non-cooperative party.
  • Treatment of confidential information and alternatives to filing allegation: the interim regulations do not provide for an administrative protective order (“APO”) mechanism. However, interested parties may request that CBP treat submitted information as business confidential information (“BCI”). According to the guidelines, BCI treatment is a right to privacy which will be granted in order to protect trade secrets and confidential commercial or financial information. Identification of the parties involved, description of the merchandise at issue, and specification of the basis upon which the alleging party is interested are all specified as ineligible for BCI treatment because they are so central to the investigation. Because their identity will likely be denied BDI treatment, interested parties may be deterred from lodging an allegation directly. In order to remain anonymous but still trigger an investigation, such parties should consider lobbying a separate federal agency to submit a referral to CBP instead of doing it themselves.
  • Determinations and Reviews: CBP has 300 calendar days, with the possibility of a 60 day extension for unique or especially complicated investigations, to issue a determination of evasion. If it finds that evasion has occurred, measures will be taken against entries of the merchandise at issue in union with the U.S. Department of Commerce (“DOC”). Additionally, the CBP will assess the appropriate duty rates in conjunction with the DOC, requiring the appropriate cash deposits to be made. Any party involved in the investigation has 30 days to request a de novo administrative review of the CBP’s determination as to evasion. At the close of administrative proceedings, CBP must issue a final administrative determination to the parties. The only possible review at this point would require judicial review by the U.S. Court of International Trade.
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Customs Seizure Benefits Florida

In August 2008, a piece of America’s aviation history, the Douglas AD-4N Skyraider*, reentered its home territory under false pretenses, which ultimately led U.S. Customs and Border Protection (CBP) agents to seize the aircraft nearly a year later.  Import and export of military aircraft and other defense articles generally requires a license or permit under the Arms Export Control Act that neither the pilot or owner of the aircraft provided to CBP officers upon the plane’s arrival in Port of Buffalo, N.Y. from France.  Rather, the pilot provided false information to CBP in order to enter the country without the appropriate authorization.

The scheme may have worked had the aircraft’s 20mm cannons not been discovered in October 2008 at the Port of Savannah, Ga hidden inside containers being imported by the aircraft’s owner, Claude Hendrickson, president of Dixie Equipment in Woodstock, Ala.  Upon this discovery, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HIS) unit launched an investigation into the circumstances surrounding the importation of the cannons, which revealed the unauthorized entry of the aircraft earlier that year.

Under 22 U.S.C. §2778(b)(2) “Control of Arms Export and Imports”, no defense article (as designated by the President on the United States Munitions List) may be imported or exported without a license, whether for export or temporary or permanent import from either the Department of State or the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF).  In this case, the importer would have required a license for importation from the ATF because the importation of the U.S. Munitions List Category 8 aircraft was permanent (as opposed to temporary import licenses, which are granted by the State Department).

The process of obtaining a permit from the ATF for importation of arms, ammunition and implements of war begins with an application Form 6, which must be signed, dated, and contain very specific information regarding the importer, foreign seller and shipper, and specifications of the article to be imported.  The regulations set forth in 27 C.F.R. §447.42 list the requirements in more detail.  Importers will generally have an answer from ATF on their permit within four to six weeks provided the importer properly completes the Form 6.  Once the importer receives the permit, it will be valid for one year from the issuance date, and the importer must then complete a Form 6A, “Release and Receipt of Imported Firearms, Ammunition and Implements of War”  in order to obtain release of the article from CBP upon its arrival into the United States.**

As a result of Mr. Hendrickson’s not following these guidelines for importing his aircraft, the plane and its log books, cannons, and other parts are now on their way to the National Naval Aviation Museum in Pensacola, Florida.

*This aircraft is an American single-seat attack aircraft that was used by both the U.S. and French military from the 1940s through the 1980s.  http://en.wikipedia.org/wiki/Douglas_A-1_Skyraider

**This is a simplified explanation of the arms licensing and permit procedure.  For more information on importing munitions, please visit the following website:  http://www.atf.gov/firearms/how-to/import-firearms-ammo-implements-of-war.html.  It is also highly advisable for importers to seek the advice of professionals engaged in the import and export of arms and munitions as well as the advice of legal counsel.

For more information see the following:

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