Importers should tighten up AD/CV duty compliance, expert says

   Importers need to double-check that products are properly classified and have accurate origination information on customs entries to avoid being the victim of stepped up U.S. Customs enforcement of unfair trade practices, according to Larry Ordet, a customs attorney at Sandler, Travis & Rosenberg.
   Congress last year passed the Enforce and Protect Act, which significantly increases Customs and Border Protection’s ability to combat anti-dumping and countervailing duty (AD/CV) evasion. Dumping occurs when overseas companies sell products into another market at below the cost of production or the price charged in the home market. To protect domestic producers against predatory pricing and foreign subsidies for exporters, the government can impose higher duty rates to raise the price of the imported goods in question. A recent Government Accountability Office report identified $2.3 billion in AD/CV duties that were owed to the U.S. government, but not collected.
   Customs and Border Protection, with better tools now and under pressure from Congress to do a better job with duty collection, is placing an increased focus on AD/CV duty collection. In August, the agency published interim rules for how it plans to change enforcement procedures for AD/CV duties.
   Meanwhile, CBP recently published interim regulations implementing the Trade Facilitation and Trade Enforcement Act of 2015 (the Customs reauthorization bill), that establishes a formal process for private parties to request a CBP investigation into claims of evasion of AD/CV duty orders.
   CBP previously accepted evasion allegations, but the agency was never required to initiate investigations, nor was it required to inform parties to an investigation of any enforcement steps taken. The new process requires CBP to take certain actions within specified timeframes, including finishing most investigations within 300 days, affords private parties that file allegations the opportunity to participate in the investigation, and obligates CBP to inform parties to an investigation of key developments, according to a client bulletin from the law firm Miller & Chevalier.
   But parties will have limited access to confidential information. Unlike AD/CVD cases, there is no Administrative Protective Order process that permits counsel for parties to an investigation to review business confidential information submitted by other parties. Instead, parties to an investigation will receive public summaries of business confidential information. Barring access to this information may ultimately constrain parties’ ability to submit effective written comments in an evasion investigation, the bulletin said.
   If CBP is uncertain as to whether merchandise subject to an evasion allegation is within the scope of an AD/CVD order, the agency may suspend the investigation and refer the matter to the Department of Commerce for a scope determination. Beyond this, the interim regulations are offer no guidance on how Commerce and Customs will interact during a scope referral. Whether such a referral would be addressed as a scope ruling request—which can take years—or through a less formal process remains to be seen, Miller & Chevalier said.
   The firm reminded clients that an importer found to be evading an AD/CVD order will be liable for the unpaid AD/CV duties for as much as the previous five years, plus a penalty, and will be required to post cash deposits on future entries of the covered merchandise. CBP can take additional enforcement measures as well, including referring the matter to other agencies such as Immigration and Customs Enforcement for possible civil or criminal investigation.
   Given the new scrutiny, companies that buy goods overseas need to take a second look at product lines that are, or may be, subject to AD/CV orders, Ordet said during an ST&R webinar earlier this month.
   Compliance professionals that have been excluding a product from an AD/CV duty order because of how it is classified should verify that classification, as well as the country of origin, to make sure they don’t run afoul of the regulations, he said.
   “If there’s an order on Chinese tires and you import tires from Vietnam, you better verify that they are actually being produced in Vietnam,” especially if production increases there following an order against China, he said.
   Those are obvious areas CBP will look at and that domestic producers or competitors may raise in submitting claims for an AD/CV investigation, Ordet added.
   Once a claim is filed, CBP’s Trade Remedy Law Enforcement Directorate has 15 business days to initiate an investigation, assuming the claim is backed up by solid evidence. It has another 95 days to inform the relevant parties about the investigation.
   It’s better to get ahead of an investigation and self-disclose any violations because the penalties will be much lower, Ordet said.
   The Justice Department’s increased use of the False Claims Act to go after companies accused of defrauding the government is another reason for importers to tighten up their compliance programs and quickly disclose any violations they find, he added.