Trade Cheats Evading AD\CVD Duties Beware – Recent Developments at Customs and the GAO
October 26, 2016

This article was co-authored by International Trade Specialist Michael J. Kelleher

AD/CV duty evasion has increased significantly in recent years, with Customs and Border Protection (“CBP”) having failed to collect $2.3 billion in such duties since 2000.[1]  Examples of evasion include misrepresentation of the product’s true country of origin, incorrect or false shipping and entry documentation, or misreporting of the merchandise’s physical characteristics.  CBP’s new authority to conduct duty evasion investigations was recently granted by Congress in response to widespread domestic industry complaints over CBP’s failure to stop duty evasion schemes.[2]

As mandated by this legislations, CBP recently issued an interim rule on a new enforcement tool for investigating claims of evasion of existing AD/CVD orders.[3]

In the past, CBP could take enforcement actions against the evasion of AD/CVD orders by foreign producers and exporters, and assess civil penalties.  Private parties, however, could not participate in the CBP investigations, meaning CBP had no obligation to notify parties that submitted allegations of evasion as to the outcome of its review.  As a result, industry participants were left in the dark about the status of their evasion claims.

The Interim Rule is intended to implement Congress’s mandate that CBP:

(1) Act on allegations of duty evasion filed by domestic producers, trade associations, unions and importers as well as other Federal agencies;

(2) Allow the alleging party to meaningfully participate in the investigation;

(3) Complete each investigation within 300 calendar days (or 360 calendar days if the investigation is “extraordinarily complicated”);

(4) Communicate that determination to the interested party who made the allegation, within five business days; and

(5) Apply specific corrective measures against importers found to have engaged in duty evasion.

As also required by Congress, the regulations provide for appeal of CBP’s final decisions within the agency via an administrative review, as well as the right to appeal either the original determination or the administrative review determination to the U.S. Court of International Trade.

Although the Interim Rule is effective as of August 22nd, CBP is accepting comments and may implement changes in a final rulemaking in the future.

[1]        See GAO Report 16-542 entitled: “Antidumping and Countervailing Duties:  CBP Action Needed to Reduce Duty Processing Errors and Mitigate Nonpayment Risk” (July 2016); see also Feb. 22, 2016 Kelley Drye Trade Advisor “Congress Passes Reauthorization Bill.” 

[2]      See Section IV (Prevention of Evasion of Antidumping and Countervailing Duty Orders”) of the Trade Facilitation and Trade Enforcement Act of 2015 (“TFTEA”), Pub. L. 114–125, 130 Stat. 122, 155, Feb. 24, 2016).

[3]      See Investigation of Claims of Evasion of Antidumping and Countervailing Duties, 81 Fed. Reg. 56,477 (Aug. 22, 2016) (“Interim Rule”).