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The Facts about Anti-Dumping and Countervailing Duties

A recent Trump executive order has sharpened regulatory focus on anti-dumping and countervailing duties considerably. If you import commodities on the ADD/CVD list there are some important facts you should know.

Anti-Dumping and Countervailing

If a foreign exporter intentionally sells goods in the United States at a price so low that it causes harm to domestic producers of the same product they are ‘dumping’. The pricing is considered predatory when goods are sold below what it costs to produce them in their country of origin. This activity is done with the intention of harming domestic producers of that product. Customs Border Protection (CBP) has identified a list of commodities that are known to be subject to this practice by foreign exporters. Those products are subject to anti-dumping duties.

Countervailing very often goes hand in hand with ‘dumping’ because the commodities are often subsidized by foreign governments and that advantage enables the exporter to sell them for less than the production cost. By imposing countervailing duties on the importer, CBP counteracts this advantage.bigstock-No-Dumping-Sign-129973496 cropped.jpg

How CBP Combats ADD/CVD

CBP enforces United States ADD/CVD laws through their Anti-dumping and Countervailing Duty Operations Unit. This group is responsible for: 

  • Conducting investigations in response to petitions filed by domestic industries
  • Conducting administrative reviews which assess an importers’ actual duty liability
  • Making recommendations for enforcement and compliance

 

The scope of CBP’s role in investigating, assessing and enforcing ADD/CVD duties is considerable and the penalties can be severe. This additional duty is imposed at high rates, often in excess of 100% of the product’s FOB value. For example, lead pencils, tires, bedroom furniture, and other products commonly imported from China or other countries have been identified as goods that are subject to very high ADD/CVD.

Trump’s Executive Order

On March 31st, President Trump signed a Presidential Executive Order “Establishing enhanced collection and enforcement of antidumping and countervailing duties and violations of trade and customs laws.” The Order clearly states the intention of the federal government to make the detection, prevention and enforcement of ADD/CVD activity a priority. As stated in Sec. 3 of the order…

Sec. 3.  Implementation Plan Development.  Within 90 days of the date of this order, the Secretary of Homeland Security shall, in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative, develop a plan that would require covered importers that, based on a risk assessment conducted by CBP, pose a risk to the revenue of the United States, to provide security for antidumping and countervailing duty liability through bonds and other legal measures, and also would identify other appropriate enforcement measures.  This plan shall be consistent with the requirements of section 4321 and section 1623 of title 19, United States Code, and corresponding regulations.

Additionally, the order goes on to instruct….

Secretary of Homeland Security, through the Commissioner of CBP, shall develop and implement a strategy and plan for combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise entering through any mode of transportation, to the extent authorized by law.

Surety Companies Concerns

Surety companies are the underwriters of customs bonds and sureties. These insurance companies are mandated by law to pay the duties owed to CBP should the importer default on payment. In recent years, the number of importers who have defaulted on paying ADD/CVD duties to CBP has skyrocketed. As ADD/CVD enforcement has increased they have become particularly concerned about increasing levels of liability exposure. Therefore, surety companies are taking an aggressive approach in trying to prevent further losses.

If your company plans to import any item subject to ADD/CVD restrictions, even if it is just a one-time shipment, it is highly possible that the insurance company that carries your import bond will require the following:

  1. Up to two (2) years of audited financial statements
  2. Possible posting of collateral in the form of cash, or a letter of credit. The collateral amount is usually the face value of your import bond. Currently a minimum continuous import bond has a face value of $50,000.

Insurance companies are taking a unified stance on ADD/CVD. If you import these restricted items you cannot avoid financial statement review or the possibility of posting collateral.

What Can You Do?

So, what does this mean to importers? It means that Customs is taking ADD/CVD activity very seriously. Since the Executive Order was signed on March 31st, there have already been a number of instances of increased scrutiny on various commodities.

Importers of ADD/CVD commodities should educate themselves and take proactive steps so they are prepared. If you do not have good financials or the ability to post collateral, you may not be able to import your cargo. If you currently do not have issues with ADD/CVD this is good for you. However if you are considering adding products you have not previously imported, check with your customs broker to make sure you don’t experience problems.

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