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CBP Offers Insight on AD/CV Duty Evasion Investigations

CBP recently posted to its website two notices of action providing additional information on the criteria it will use in determining whether to initiate investigations of antidumping or countervailing duty evasion as well as the measures it will take while conducting such investigations.

The Enforce and Protect Act, part of the Trade Facilitation and Trade Enforcement Act enacted in 2016, gave CBP a significantly expanded role in investigating AD/CV duty evasion and the authorities to match. Under CBP regulations implementing the EAPA any interested party, including competing importers and federal government agencies, may submit allegations that AD/CV duties are being evaded; e.g., through misrepresentation of the goods’ true country of origin, false or incorrect shipping and entry documentation or misreporting of the goods’ physical characteristics. CBP has broad authority to conduct investigations of these claims and can impose initial remedial measures that could interrupt a supply chain in as little as 90 days. Any final determination of evasion may be met with not only AD/CV duties but also other enforcement measures such as civil or criminal investigations.

In a 13 December 2016 letter CBP announced its initiation of an evasion investigation concerning the AD duty order on steel wire garment hangers from mainland China based on evidence establishing a reasonable suspicion that hangers of mainland Chinese origin were being transshipped through Thailand to avoid AD duties. CBP said the complainant had provided evidence (i) reasonably suggesting that the Thai exporter had insufficient capacity to produce the shipments at issue and (ii) tying the Thai exporter to mainland China-based manufacturers and exporters of hangers. In addition, there were significant discrepancies between the information the U.S. importer provided in response to a CF 28 and what CBP observed at the exporter’s facility; e.g., the facility was not open during the reported hours of operation, only a fraction of its machines were operational and there was insufficient staff to operate the machines on hand.

In response, CBP has imposed the following interim measures: entries in this investigation that entered the United States as not subject to AD duties have been rate adjusted to reflect that they are, live entry is required for all future imports for the U.S. importer (i.e., all entry documents and duties must be provided before cargo is released into U.S. commerce), and CBP will further suspend liquidation of any entry entered on or after 11 October 2016 (the date the investigation was initiated) and extend the period for liquidation for all unliquidated entries that entered before that date. For any entries that have liquidated and for which CBP’s reliquidation authority has not yet lapsed, CBP will reliquidate those entries accordingly.

Separately, CBP notified another complainant on 17 October 2016 that it would not initiate an investigation concerning the AD duty order on circular welded pipe from mainland China. CBP pointed out that an evasion allegation must reasonably suggest not only that goods subject to an AD or CV duty order were entered into the United States by the importer alleged to be evading but also that such entry was made by a material false statement or act, or material omission, that resulted in the reduction or avoiding of applicable AD/CV cash deposits or other security. CBP said the allegation at issue failed to meet the second criterion because it was premised on the complainant’s own calculation of what it believed would have been the AD/CV duties owed by the importer based on aggregate data (i.e., not specific to the importer) and its conclusion that it was not a “commercial reality” for the importer to have paid that amount of duties.

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