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New AD Duty Evasion Probe Targets Mainland Chinese Glycine as CBP Considers Ways to Improve AD/CV Duty Collections

U.S. Customs and Border Protection on 28 August initiated an investigation to examine an allegation by a domestic manufacturer of glycine that an importer was evading the antidumping duty order on glycine from mainland China by transshipping glycine from the mainland through Cambodia. Following a review of information provided by the importer and a site visit to Cambodia, CBP determined that there is a reasonable suspicion that a co-ordinated transshipment scheme exists. For example, CBP found that there is no known glycine production in Cambodia, one of the companies involved has a demonstrated history of shipping non-scope amino acid products to the importer directly from mainland China, and the facility in Cambodia lacked the basic infrastructure to process and package significant volumes of glycine, much less produce it.

As a result, CBP is imposing the following interim measures.

  • rate adjusting entries of subject goods entered as not subject to the AD duty order and requiring AD cash deposits
  • requiring live entry for all future imports by the importer at issue
  • rejecting any entry summaries and requiring a refile for those that are within the entry summary reject period
  • suspending liquidation of any entry entered on or after 28 August and extending the liquidation period for all unliquidated entries entered before that date
  • reliquidating any entries that have liquidated for which CBP’s reliquidation authority has not yet lapsed
  • evaluating the importer’s continuous bond to determine its sufficiency

The Enforce and Protect Act, part of the Trade Facilitation and Trade Enforcement Act, 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.

Meanwhile, CBP is considering a number of options for further action to ensure the collection of AD/CV duties on imported goods. Earlier this year President Trump issued an executive order directing federal authorities to step up AD/CV duty collections, which an August 2016 Government Accountability Report said had fallen US$2.3 billion short over the previous 15 years.

Using authority provided under the Trade Facilitation and Trade Enforcement Act to adjust bonds based on risk, CBP is discussing the concept of a supplemental AD/CV bond with a working group in the Commercial Customs Operations Advisory Committee’s Trade Enforcement and Revenue Subcommittee. These discussions will serve as the basis of a pilot initiative that will test the outputs of statistical risk models currently under development. Based on the lessons learned from that pilot, CBP will work toward its ultimate goal of more accurately assessing bond amounts based on a statistically valid analysis.

At a recent meeting, COAC endorsed the idea of a supplemental AD/CV bond, which it said should be available as a single transaction or continuous bond, have a separate activity code, and be required to secure the potential shift in AD/CV duty rates for active orders (of which there are currently about 420). COAC plans to provide CBP with a white paper that offers recommendations on how this supplemental bond would be calculated and automated in the Automated Commercial Environment.

COAC also recommended that CBP require live entries for AD/CV shipments for (i) importers with a previous unresolved instance of AD/CV duty non-payment at the time of entry summary and (ii) importers who do not pay an increased duty bill within 60 days of issuance (unless there is a valid protest issue that can be filed within 180 days of issuance). COAC said CBP should also establish and publicise a policy for removing an importer from live entry once it has rectified any payment problems and/or demonstrates that it was not at fault for any late file or payment (i.e., due to a technical or processing error).

Finally, COAC recommended that CBP provide additional data and information to sureties. To support more robust underwriting of AD/CV bonds, COAC recommended that CBP (i) expand Automated Surety Interface data to include entry summary line item detail and AD/CV 10-digit case numbers, (ii) provide visibility to flagging the AD reimbursement statement in ACE or immediate notification if this statement is not filed with the entry summary, and (iii) improve the functionality and information available in the ACE surety portal.

To help manage the potential risk of importer default, COAC said CBP should notify sureties of (i) importers placed on sanction by CBP and when they are put on live entry, (ii) importers who immediately default on payment of periodic monthly statements, (iii) debit vouchers (in real time), (iv) the issuance of CBP forms 29 (Notice of Action) and 4647 (Notice to Redeliver Merchandise), and (v) prior disclosures related to non-payment of AD/CV duties. COAC also urged CBP to provide sureties with the ability to add and maintain current names and addresses of importers, which are often verified through the underwriting process.

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