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This Week's Trade & Tariff Perspective

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
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.

Government resources to help you manage AD/CVD trade compliance

 

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Trade & Tariff Resources

Get the latest news regarding tariffs and trade that can impact your business. We break down the variables of recent changes into simple, effective summaries you can use to better understand the ever-changing and often complicated trade policy and enforcement environment.

Section 301 - Unfair trade practices

What is it?

Section 301 of the Trade Act of 1974 — Allows the United States Trade Representative (USTR) to suspend trade agreement concessions or impose import restrictions if it determines a U.S. trading partner is violating trade agreement commitments or engaging in discriminatory or unreasonable practices that burden or restrict U.S. commerce.

Background ReportCongressional Research Service – Section 301 of the Trade Act of 1974 – August 2020

Section 232 - National security concerns

What is it?

Section 232 of the Trade Expansion Act of 1962—Allows the president to adjust imports if the Department of Commerce finds certain products are imported in such quantities or under such circumstances as to threaten to impair U.S. national security.

Background ReportCongressional Research Service – Section 232 Investigations: Overview and Issues for Congress – August 2020

Section 201 – Cause/threat to domestic industry

What is it?

Section 201 of the Trade Act of 1974—Allows the president to impose temporary duties and other trade measures if the U.S. International Trade Commission (ITC) determines a surge in imports is a substantial cause or threat of serious injury to a U.S. industry.

Background ReportCongressional Research Service – Section 201 of the Trade Act of 1974 – August 2018

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Trade & Tariff FAQs

Q: What is a tariff?

Tariffs or duties are taxes assessed on imports of foreign goods, paid by the importer to the U.S. government, and collected by U.S. Customs and Border Protection (CBP). Current U.S. tariff rates may be found in the Harmonized Tariff Schedule (HTS) maintained by the U.S. International Trade Commission (ITC). The U.S. Constitution grants Congress the sole authority to regulate foreign commerce and therefore impose tariffs, but, through various trade laws, Congress has delegated authority to the president to modify tariffs and other trade restrictions under certain circumstances.1

Q: What are various types of import restrictions that can be imposed by the government?

Tariffs – A tax on imports of foreign goods paid by the importer. Ad valorem tariffs are assessed as a percentage of the value of the import (e.g., a tax of 25% on the value of an imported truck). Specific tariffs are assessed at a fixed rate based on the quantity of the import (e.g. 7.7% per kilogram of imported almonds), and are most common on agricultural imports.

Quotas – A restriction on the total allowable amount of imports based either on the quantity or value of goods imported. Quotas are in place on a limited number of U.S. imports, mostly agricultural commodities, in part due to past trade agreements to remove and prohibit them.

Tariff-Rate Quota (TRQ) –TRQs involve a two-tiered tariff scheme in which the tariff rate changes depending on the level of imports. Below a specific value or quantity of imports, a lower tariff rate applies. Once this threshold is reached, all additional imports face a higher, sometimes prohibitive, tariff rate.

Q: Have U.S. trading partners taken or proposed retaliatory trade actions?

Yes. Some U.S. trading partners subject to the additional U.S. import restrictions have taken or announced proposed retaliations against each of the three U.S. actions. Since April 2018, a number of retaliatory tariffs have been imposed on U.S. goods accounting for $126 billion of U.S. annual exports, using 2017 export values.

Q: How much has the U.S. government collected from the various trade remedy measures?

U.S. Customs and Border Protection (CBP) assesses and collects duties on U.S. imports, including the additional duties imposed as a result of the president’s tariff actions. As of September 9, 2020, U.S. CBP has reported the following duty assessments.

Q: Are products of Hong Kong subject to the additional Section 301 duties against China?

No. Additional duties imposed by the Section 301 remedy only apply to articles that are products of the People’s Republic of China (ISO Country Code CN). Imported goods that are legitimately the product of Hong Kong (HK) or Macau (MO) are not subject to the additional Section 301 duties. Please note that Section 301 duties are based on country of origin, not country of export.2

Q: Are Section 301 duties eligible for drawback?

As noted in CSMS Message 18-000419, Section 301 duties are eligible for duty drawback. Drawback is the refund of certain duties, internal revenue taxes, and certain fees collected upon the importation of goods. Such refunds are only allowed upon the exportation or destruction of goods under U.S. Customs and Border Protection supervision.

Q: What is the timing of duty calculations on immediate transportation in bond entries subject to Section 301?

Duties are due on goods that are entered for consumption, or withdrawn from warehouse for consumption, on or after the effective date of the provisional tariffs. For entries covered by an entry for immediate transportation, and with a country of origin of China, and a Harmonized Tariff Schedule (HTS) classification covered by Annex A to the FRN, such entries shall be subject to the duty rates in effect when the immediate transportation entry was accepted at the port of original importation, pursuant to 19 CFR 141.69 (b), which states:
Merchandise which is not subject to a quantitative or tariff-rate quota and which is covered by an entry for immediate transportation made at the port of original importation, if entered for consumption at the port designated by the consignee or his agent in such transportation entry without having been taken into custody by the port director for general order under section 490, Tariff Act of 1930, as amended (19 U.S.C. 1490), shall be subject to the rates in effect when the immediate transportation entry was accepted at the port of original importation.

Q: Are products entered under the Section 321 de minimis exemption (under $800) subject to Section 301 duties?

No, not right now. Goods properly entered under Section 321 are not subject to Section 301 duties. Please note that a formal entry is required if a shipment contains merchandise subject to AD/CVD. Goods subject to AD/CVD do not qualify for Section 321. Something to keep an eye on: U.S. Customs and Border Protection (CBP) submitted a proposal in early September 2020 to the Office of Management and Budget that would eliminate the $800 de minimis exemption for goods subject to Section 301 tariffs. Remember, Section 321, 19 USC 1321 is the statute that describes de minimis. De minimis provides admission of articles free of duty and of any tax imposed on or by reason of importation, but the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed $800. The de minimis threshold was previously $200, but increased with the passage of the Trade Facilitation and Trade Enforcement Act (TFTEA).

Q: Can I still apply for exclusions to the Section 301 (China) tariffs?

The time window to submit new exclusion requests is now closed, but the USTR is considering extensions of exclusions granted from Lists 1, 2, 3, and 4. While the USTR approved, on average, 35% of requests under the first two actions, the approval rates under the third and fourth actions were 5% and 7%, respectively.3 Be sure to check in with your trusted trade advisors to see if new comment periods open.

Q: Are products used to support the fight against COVID-19 subject to the additional Section 301 (China) tariffs?

The USTR announced on March 20, 2020, that, prior to theCOVID-19 outbreak, the agency had been working with the U.S. Department of Health and Human Services “to ensure that critical medicines and other essential medical products were not subject to additional Section 301 tariffs.” Consequently, the United States had not imposed tariffs on certain critical products, such as ventilators, oxygen masks, and nebulizers. Moreover, the USTR indicated that, in recent months, it has prioritized the review of requests for exclusions on medical care products, resulting in exclusions granted on basic medical supplies, including gloves, soaps, face masks, surgical drapes, and hospital gowns. Since March 2020, the USTR has exempted certain medical products from Section 301 tariffs in several rounds of exclusions.3

Q: How do I find out if my product is subject to Section 301 tariff duties?

Enter the product’s harmonized tariff schedule (HTS) classification on the USTR website. In addition, you can refer to our exclusive guide to quickly search both the Section 301 tariff lists but also identify if there are any exclusion opportunities. Talk to your Trusted Advisor® expert at C.H. Robinson to learn more.

Q: Do Section 301 (China) duties still apply if I ship goods to another country, such as Canada or Mexico, and have them packaged there before entering the commerce of the United States?

Yes. Basic changes/processes such as packaging, cleaning, and sorting would not change the country of origin to be declared in most cases. The origin would still be China and therefore the Section 301 duties would still apply.

Q: If I previously paid Section 301 (China) duties, but an exclusion was later issued by the United States Trade Representative (USTR), can I get my money back?

Yes. You have the opportunity to potentially recover duties paid on previous entry activity. Your customs broker, trade attorney, or trade consultant can submit a refund request via Post Summary Correction (PSC) or Protest as long as the entry has not exceeded the liquidation date plus 180-day time period (roughly 480 days from the original entry date). Remember, your company doesn’t have to be the one that requested the exclusion in the first place. You qualify as long as your product meets the specific description of the exclusion granted by the USTR.

Q: Does U.S. Customs and Border Protection (CBP) pay interest when refunding duties previously paid?

Yes! CBP does pay interest from the date the original money was deposited. The current interest rates are published in the Federal Register on a quarterly basis. Review the most recent Federal Register Notice for the latest rates.

References

1. Congressional Research Service – Trump Administration Tariff Actions (Sections 201, 232, and 301): FAQs

2. Section 301 Trade Remedies Frequently Asked Questions

3. Congressional Research Service - Section 301: Tariff Exclusions on U.S. Imports from China

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