As many importers are aware, United States Customs and Border Protection ("Customs" or "CPB") enforces Antidumping and Countervailing Duty ("AD/CD") orders that have been issued by the Department of Commerce. Antidumping duties are additional duties that have been imposed on specific imported products from specific countries because it has been found that the products are being sold into the U.S. at less than fair value, and that it is causing injury to a U.S. industry. Countervailing duties are assessed by the Department of Commerce when certain imported products from certain countries are being subsidized and there is material injury to the competing U.S. industry. In the case of both AD/CD orders the objective is to levy a duty that levels the playing field for the U.S. industry. These duties can be excessive, often easily exceeding 100% of the value of the imported items. Regardless of whether importers are importing items that are subject to antidumping or countervailing duty orders, importers must be ever vigilant to avoid being caught in the gauntlet of an antidumping or countervailing duty order.
Hypothetically, assume that a U.S. company imports honey from Country A, where there is no antidumping duty on honey from that country. However, there is an antidumping duty order on honey from Country B. The importer has declared the country of origin as Country A, and has filed a normal entry. Customs now challenges the country of origin of the honey, demanding absolute proof that the country of origin was that declared, Country A where no antidumping duty order applies, and not Country B, which is the subject of an antidumping duty order. Suddenly the importing company finds itself in the middle of an antidumping case about which the importer may have known little, if anything, prior to importing the honey. Further, the importer did not take adequate steps when importing the honey to be able to satisfy an after the fact demand by Customs that the importer produce absolute proof that Country A was the correct country of origin of the honey as the importer had declared it to be.
Matters can be worse. Assume that the importer bought the honey in Country A, but the supplier had acquired it from Country B, the true country of origin of the honey, and the supplier never told its U.S. importer customer that the country of origin of the honey was Country B, leaving the importer to believe the country of origin was Country A. Because the honey actually originated in Country B, against which there was an outstanding antidumping duty order, the U.S. importing company has an enormous duty obligation that it did nothing to create. These sorts of instances can and do happen.
Customs' Office of International Trade focuses resources on certain Priority Trade Issues. These are issues that Customs believes are high-risk areas that, among other things, can cause significant revenue loss. Among those issues are antidumping and countervailing duties. Customs is highly focused on detecting and deterring circumvention of antidumping and countervailing duty orders. In May 2011, Allen Gina, Assistant Commissioner, Office of International Trade, U.S. Customs and Border Protection, testified before the Senate Finance Committee, International Trade, Customs, and Global Competitiveness Subcommittee. His testimony specifically dealt with the measures Customs takes and plans to take to enforce antidumping and countervailing duty orders. Among other things Assistant Commissioner Gina stated, "We take all indications or allegations of evasion very seriously, and in coordination with U.S. Immigration and Customs Enforcement (ICE), employ all available methods in accordance with the law to address these matters." He went on to state that, " In the pre-entry environment, CBP works with U.S. industry and foreign customs agencies to share information prior to arrival, monitor the import process, verify compliance, and evaluate risk."
What all of this means to an average importer is that he or she must know the product. The importer must know if there is an antidumping or countervailing duty order against the product. The importer must also know whether the country of origin of the imported product is that against which an outstanding antidumping or countervailing duty order exists. If the product is purchased from a country where there is no order, then the importer must take care to be sure he or she can prove that the country of origin of the product is the country of origin from which the product was imported and not the country against which the order has been issued.
The importer must know its supplier. Simply because the product was imported from a country where there is no antidumping or countervailing duty order does not mean that country is the country of origin of the product. The supplier may have innocently acquired the product from a producer in a country covered by an order, or there could be intentional transshipments occurring. Knowing the supplier may well mean meeting with the supplier to confirm the truth of all representations being made. The importer must be able to document the country of origin of the product. If the importer cannot document the country of origin, Customs may well take the position that the product came from a country subject to an antidumping or countervailing duty order. The importer must be aware that if an antidumping or countervailing duty order exists, and the imported product is within the scope of the order, then duties are assessed regardless of whether the importer knew of the order or that the product was covered by the order. Even the innocent importer who did not try to circumvent an order can be hurt and have to pay duties if the country of origin of the imported product is that against which an order has been issued. To remain safe the importer must undertake the necessary due diligence. Innocence may avoid the assessment of a penalty, but it will not avoid the assessment of duties if the country of origin of the imported product is that covered by an outstanding order.
Remember that Customs is on the alert. It has had successes in this area, and has even been successful in bringing criminal indictments against individuals and companies that have allegedly intentionally circumvented antidumping or countervailing duty orders. There is an indictment pending against individuals for the alleged illegal importation of honey, and Customs has recovered millions of dollars of duties in other situations, such as:
- transshipped steel wire garment hangers – recovery of $13.1 Million;
- transshipped shrimp – recovery of $2.5 Million; and
- transshipped citric acid – recovery of $17 Million.
The domestic industry works with Customs on these matters, and domestic industries generally are not a fan of imports under any circumstances. Importers must undertake due diligence in importing, know his or her products and know his or her suppliers. Importers must be knowledgeable, be alert, be aware, be able to document country of origin, and if in doubt, contact a Customs attorney or Customs broker for assistance.