Recent Trade & Tariff Perspectives

September 15, 2021 | Kevin Koch Senior Manager, Product Development

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What You Need to Know About Antidumping and Countervailing Duty Cases

United States Customs and Border Protection (CBP) identifies antidumping and countervailing duties (AD/CVD) as a Priority Trade Issue (PTI) because of their critical effects on U.S. industry. AD/CVD duties are fees added to goods that are underpriced by exporters in foreign countries. The added fees offset the low prices to ensure that U.S. entities are not harmed by anti-competitive behavior.

It is important that you understand this PTI well, study the connection and effects it has on your supply chain, and learn how to remain compliant during a period of increasing trade compliance complexity and enforcement.

What are AD/CVD duties and how big of an issue is this?

AD/CVD are additional duties determined by the U.S. Department of Commerce (often referred to as Commerce or DOC), which offset unfair low prices and foreign government subsidies on certain imported goods. AD/CVD rates are in some cases significantly higher than other importation duties. AD/CVD cash deposit rates range from 0% through 1,731.75%. Because of this, these high duty rates may result in efforts to evade the duties and illegally import the goods.

In fiscal year 2019, approximately $19 billion of imported goods were subject to an AD/CVD order, and as of January 16, 2020, CBP enforced 503 AD/CVD orders on approximately 150 commodities from forty-nine countries. This graph represents the top ten countries.

U.S. AD/CVD Orders In Force by Country

Source: UITC as of January 11, 2021.

What exactly is dumping?

Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer’s sales price in their country of origin (“home market”) or at a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the U.S. market is called the “dumping margin.”

What about a countervailable subsidy?

Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture, or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions.

The statute and regulations establish standards for determining when an unfair subsidy has been conferred. The number of subsidies the foreign producer receives from the government is the basis for the subsidy rate by which the subsidy is offset, or “countervailed,” through higher import duties.

What is the purpose of antidumping and countervailing duty laws?

Antidumping and countervailing duties are intended to offset the value of dumping and/or subsidization, thereby leveling the playing field for domestic industries injured by unfairly traded imports.

What are the roles of the various agencies in the U.S. with respect to AD/CVD proceedings?

Petition phase

The domestic industry files a petition with both Commerce and the U.S. International Trade Commission (ITC). Commerce reviews the petition for sufficiency. If it determines that the petition contains the relevant information, it will initiate an investigation into whether the goods—subject to the petition—are being sold at less than fair value or benefiting from unfair subsidization.

Investigation phase

Once an investigation has been initiated, Commerce examines whether a producer or exporter is dumping and/or receiving unfair subsidies. In the meantime, the ITC investigates whether the domestic industry is injured, or there is a threat of injury, from the potentially dumped or subsidized imports.

The Office of Enforcement and Compliance within the International Trade Administration (ITA) at Commerce is responsible for enforcing the U.S. AD/CVD laws to protect U.S. businesses from unfair competition resulting from dishonest pricing by foreign companies and inequitable government subsidies to foreign companies.

During an investigation, if Commerce discovers that imported merchandise was sold in the United States at a dumped or unfairly subsidized price, the agency will direct CBP to suspend liquidation of incoming entries (and potentially certain past entries within a specific time period) and collect AD/CVD on those entries.

If Commerce makes a final determination that imports were dumped and/or subsidized, and the ITC makes a final determination that a U.S. industry was materially injured or threatened with material injury, Commerce will issue an AD/CVD order continuing that suspension of liquidation and updating the rates of duty-collection to reflect the agency’s final calculations, if needed.

AD/CVD order enforcement

Once an AD/CVD order is in place, Commerce conducts reviews of merchandise imported into the United States to determine if imports are being sold at less than fair value (i.e., dumped) or benefiting from unfair subsidization. If Commerce continues to find that imports are being dumped or unfairly subsidized, it directs CBP to assess AD/CVD in the amount calculated by Commerce.

CBP is responsible for enforcing the AD/CVD laws on imported goods. CBP collects AD/CVD cash deposits, administers AD/CVD entries, assesses and collects final AD/CVD, and enforces AD/CVD on imports that evade AD/CVD orders. CBP uses significant national assets from across the agency to enforce AD/CVD laws. CBP also collaborates with U.S. Immigration and Customs Enforcement to substantiate and act upon allegations of duty evasion and to support enforcement actions.

Special call-out regarding duty liability: The United States uses a retrospective system to assess AD/CVD, which means that the duties that CBP collects from importers at the time of entry are only estimated. The final duties are often not determined until two to three years later, when the DOC instructs CBP to collect final duties owed.

AD/CVD cases and customs enforcement is on the rise

CBP's Office of Trade recently stated that over the past five years, we have seen a dramatic increase in the number of AD/CVD orders. Along with this trend, foreign competitors have also begun to increase evasion of these orders by:

Transshipping through third countries
Misclassifying merchandise
Falsifying records to avoid paying AD/CVD

CBP has new and strengthened authorities to investigate and enforce

In 2016, Congress gave CBP new authorities to investigate these evasion schemes and to strengthen AD/CVD enforcement through the Enforce and Protect Act (EAPA), as part of the Trade Facilitation and Enforcement Act (TFTEA). EAPA is a transparent investigation of AD/CVD evasion allegations that allows parties to participate in and learn the outcome of the investigation.

EAPA ensures that CBP can take swift action, such as requiring payment of AD/CVD duties when there is a reasonable suspicion of evasion. Additionally, Congress put strict timelines in place that require CBP to take no more than 360 days to conduct an EAPA investigation.

One key EAPA action includes implementing interim measures within ninety days of beginning an investigation to ensure CBP can bill for the correct duties owed the U.S. government. Interim measures allow CBP to require the importer(s) to pay cash deposits for AD/CVD duties on any future imports until the conclusion of the investigation and to pause the final processing of payment to CBP for entries up to one year prior to the initiation of the investigation. This allows CBP to determine if additional duties are still owed.

As of October 1, 2020, EAPA has launched 131 investigations and identified more than $600 million in AD/CVD duties owed to the U.S. government.

Best practices for AD/CVD trade compliance and how can C.H. Robinson help

If you are importing any goods that are subject to AD/CVD, it is important that you work with a trusted advisor® to ensure the accurate case numbers, duty rates, etc. are shared and reported upon entry. Even if you are disclaiming AD/CVD cases from your customs entry, you will want to document your product details internally and explain why your product does not fall within the scope of the order.

C.H. Robinson’s trade policy consulting team helps clients in a variety of ways regarding AD/CVD compliance, from risk evaluation to classification, rulings, and scope analysis. This can be a tricky part of trade compliance, often bearing a lot of scrutiny, and it is always best to have an expert there to assist you in making the right decisions. Connect with one of our trade policy experts to learn more.

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