In September 2011 we published an article entitled Enforcement of Antidumping and Countervailing Duties – Know the Products You Import. The article dealt with United States Customs and Border Protection ("CBP") efforts to detect and deter evasion of antidumping and countervailing ("AD/CV") duty orders, and steps innocent importers should take to avoid being caught in the legal quagmire of being accused or investigated for alleged violation of AD/CV duty orders. Given that the enforcement efforts of CBP in this area have increased and the passion of domestic industries for CBP to pursue enforcement efforts have continued unabated, it is worthwhile to visit this topic once again.
In fiscal year 2012, CBP completed more than 50 audits of importers relating to AD/CV duty commodities, and issued more than 50 penalties for alleged violations of AD/CV duty orders. CBP received almost 150 allegations of evasion and noncompliance in this area. It is clearly open season as relates to both allegations of evasion and penalties for alleged noncompliance. Further, domestic industry continues to push for legislation in Congress to strengthen CBP efforts to detect and stop alleged violations. Importers must be careful and aware of their own processes and procedures when importing commodities that are in any way related to an AD/CV case. Further, it is not always going to be obvious that a commodity is related to an AD/CV case.
Just because a company imports a commodity into the United States that is not subject to AD/CV duties from the commodity's country of origin does not mean that same commodity does not carry with it AD/CV duties if imported from another country. The cautious and careful importer must know if the commodity carries antidumping or countervailing duties if imported from any country. CBP has published on its website a list of FAQ that can help importers learn whether imported commodities are subject to AD/CV duty orders. Those FAQs are worth reading, but the analysis of one's circumstances does not stop with just reading and trying to follow the FAQs.
The FAQs are going to provide one with the tools to try to learn whether one's commodity is subject to AD/CV duties if originating in certain countries, but they do not instruct in what to do if one's imports are challenged as originating in a country where AD/CV duties apply, when the commodity originated in a country where no AD/CV duties apply. The importer must be prepared for any circumstance including when CBP wants proof that the goods have the country of origin ascribed to them on the entry documents.
In a recent audit that was successfully concluded for the importer, CBP was under the incorrect suspicion that the commodity originated in a country where AD/CV duties applied. However, as a point of fact the commodity originated in a country where no AD/CV duties were applicable. The burden of proof that was required from the importer was enormous, and if that burden had not been satisfied CBP may well have assessed massive AD duties on the imports even if CBP did not have the necessary proof to assess a penalty.
Just checking to see if AD/CV duties apply is not necessarily enough even when that checking reveals that duties do not apply. The importer must be prepared to substantiate to CBP that the importer's claims as to country of origin are correct and accurate. This may mean visiting the vendor in the foreign country, having representatives on the ground in the foreign country, and having an unimpeachable document trail as to the origin of the goods. Each situation is going to stand on its own and what works in one situation may not work in another.
Innocence is not necessarily enough, particularly when CBP is so aggressively enforcing in this area, and there exist such a cornucopia of evasion and noncompliance allegations. The statistics of what CBP did in fiscal year 2012 speak for themselves and there is no indication that this CBP priority trade issue is going to lose momentum any time in the immediate future. Even the Department of Justice is in the act with criminal prosecutions against individuals for such things as allegedly claiming honey originated in one country where no AD duties applied rather than another country where AD duties were applicable, all to avoid antidumping duties. Further, as we reported in our January 29, 2013 article Evading Duties Can Be Costly to Importers, but Lucrative for Others, False Claim Act cases have been successfully resolved on the side of the government providing informants with multimillion dollar whistle blower rewards in cases involving alleged AD/CV duty evasions or noncompliance. The government is not going away soon with respect to the investigation and pursuit of AD/CV duty order violations.
Should one be chosen as the unlucky to undergo an audit or investigation they should be careful and be prepared. An importer does not have to have done anything wrong to be the target of an incorrect allegation or even a false allegation by someone who wants to do the importer harm. Be careful, do things correctly, and if CBP should appear asking questions or advising of an audit do not try to do things on your own, get experienced help. Large amounts of both duties and penalties can be at risk.