On March 4, 2021, US Customs and Border Protection (CBP) announced that an Enforce and Protect Act (EAPA) investigation had been initiated with implementing measures against 15 importers suspected of evading antidumping (AD) and countervailing duties (CVD) on quartz surface product (QSP) from China via transshipment through Malaysia.
According to CBP, EAPA investigations are a “game-changer” being “one of the most powerful and successful authorities in CBP’s arsenal of tools.” In 2020 alone, EAPA investigations recovered nearly $287 million in AD/CVD duties owed to the US Government – a 500 percent increase since the EAPA program began in 2017.
The recently announced EAPA investigation on QSP from Malaysia names an unusually high number of importers as having evaded AD/CVD duties on imports from China, continuing CBP’s aggressive and evolving tactics through this enforcement tool. Based on this EAPA investigation, CBP is imposing various interim measures that will leave the dutiable status of QSP from Malaysia uncertain and potentially exposed to the AD/CVD order on QSP from China until CBP reaches a determination.
Under the EAPA, CBP can investigate whether companies evaded AD/CVD orders through a multi-government party, on-the-record, and public administrative proceeding, where the alleged violators can appeal CBP’s determination through administrative and judicial reviews. Allegations of suspected evasion can be made by any interested party through CBP’s public E-Allegations Portal.
Through this enforcement tool, CBP has 90 days to determine whether reasonable suspicion exists under the allegation concerning the covered merchandise in order to implement interim measures to ensure collection of the correct duties owed to the US Government. This includes suspending liquidation, as in the case with EAPA investigation on QSP from Malaysia, or even requiring importers to pay cash deposits for AD/CVD duties on any future imports until the conclusion of the investigation.
Furthermore, the EAPA permits CBP to:
As of January 16, 2021, CBP’s Automated Commercial Environment (ACE) will flag entries that are subject to EAPA investigations or court injunction actions. Presumably, this makes it easier for CBP to identify entries and collect cash deposits and suspend liquidation on goods covered by an EAPA investigation.
Since the EAPA was implemented, CBP has launched over 131 investigations, which have conducted over 30 on-site verification visits to different foreign suppliers, and identified over $600 million in AD/CVD duties owed to the US Government.
Aside from the recently announced investigation on QSP from Malaysia, recent EAPA Investigations have involved:
CBP is leveraging the EAPA to target various industries based on a suspicion of evading AD/CVD duties by aggressively scrutinizing imports potentially covered by an AD/CVD order. This robust tool permits CBP to request voluminous documentation from importers and their suppliers based on an allegation of suspected evasion from any interested party, requiring them to verify whether origin, classification, valuation, and other claims to CBP were accurate. Failing to defend the accuracy of such entry claims will expose the importer to significant AD/CVD duties, continuous or single-transaction bonds, and potentially other penalties or enforcement actions from other agencies.
Companies that navigate in this space must ensure the origin, classification, and value claims on such imports are accurate and properly documented to defend against the increasingly high risk of CBP action through this enforcement mechanism. In effect, CBP treats EAPA investigations as a kind of strict liability where if evasion is found, the importer must pay the AD/CVD duties. Moreover, it provides CBP with wide latitude to test an importer’s obligation to exercise reasonable care in these situations and penalize an importer for lack of compliance under this standard.
Planning for EAPA investigations can also be extremely difficult as an importer may be under investigation and not know until CBP takes action or issues a CF-28. Importers will need to do significant due diligence on their supply chains to ensure that goods that may be included in a scope description are not transshipped to evade AD/CVD orders. It is thus critical that importers and suppliers of products with a nexus to AD/CVD orders review and document their entire supply chains to protect themselves from this high-risk exposure.