Customs, Anti-Dumping, and Enforcement

Update: ACE, the Center of Excellence, and

Audits

IWPA Convention 2017

It’s Going to Get Bumpy…..

• Enforcement/Circumvention Issues

(ENFORCE Act)

• AD/CVD Update (Plywood, Softwood

Lumber)

• Prepare for Government Contacts

CBP ENFORCEMENT EMPHASIS

Focus on Enforcement

• Enforcement push to intensify

• From CBP Annual Report:

• Audits increased by 20%

• 300% increase in duty discrepancies found

• High dollars:

• Solar: $8 million

• Ball Bearings: $32 million

• Focus on ”securing the Treasury”; enhanced bonds for

new importers

• Cooperate with U.S. industry to improve collection

“Partnerships with the trade community are also critical to identify unfair trading practices. The trade community provides market intelligence and commodity expertise to identify unfair trading

practices or illegal trading activities.”

2016: New Enforcement Tools Go Live

• Trade Facilitation and Enforcement Act of 2015:

• Established Trade Remedy Law Enforcement

Division within DHS

• Provided authority to collect information regarding

alleged duty evasion

• Directed DHS to engage with foreign customs

authorities

• Granted CBP new authority to investigate claims of

circumvention related to existing antidumping and

countervailing duty orders

First Initiation Under Enforce and Protect Act

Enforce & Protect Act: First Case

• CBP initiated investigation based on information

provided by a competitor

• Product was “Wire Garment Hangars” exported from

Thailand.

• There is an AD/CVD Order on this product from China

• CBP conducted on-site audit

• Company did not possess the machines or staff to

generate the volume they claimed to be exporting

• Company officials could not identify any supplier of

wire (the raw material)

• CBP concluded that they were transshipping the

merchandise from China and applied the China

antidumping rate (PRC-wide is 187.25) retroactively

Criminal Penalties re: AD/CVD Fraud

• CONSPIRACY: 8 Months in Prison & $2.5 Million

Fine

• President of a pool cleaning supply company

convicted for conspiring to commit customs fraud

for imports of chlorinated isocyanurates (fraud

related to AD case involving China).

• FRAUD: Criminal Conviction & $3 million fine

(evasion of AD case on graphite electrodes). Case

originally brought under False Claims Act and initiated

by competitor

• 70 Months in Jail for Mexican dry cleaning business

evading AD order on Chinese wire garment hangars

(country of origin fraud)

• JAIL; FINES for importers evading $180 million in

antidumping duties on honey from China.

PLYWOOD/SOFTWOOD LUMBER

AD/CVD

Chinese Plywood AD/CVD

• Case Status:

– Prelim CVD expected April 17; AD June 16

– DOC chose 2 mandatory respondents in each case

• Critical Circumstances Alleged (90 day retroactive suspension of entries & duty demand if DOC agrees; ITC has LAST WORD)

• ITC Final Phase: Starting soon; coordinated response is key; cabinet makers & other end users are key to explaining product differences

Chinese Plywood AD/CVD

• Lots of Activity to monitor at the DOC

– New Subsidy Allegations & possible impact on

CVD margins (and WHEN?)

– Claims regarding accuracy of mandatory

respondents’ affiliations with U.S. parties

– Scope Issues

Softwood Lumber from Canada

AD/CVD • One week behind Plywood

• Case Status

– CVD Prelim: April 23

– AD Prelim: June 23

– DOC chose 4 mandatory respondents in CVD; 4

in AD

– Critical Circumstances (Alleged in the Petition)

– Issues relating to differences in provincial

subsidies; possible company “exclusion” process

• New SLA?

Life as Importer of AD/CVD Product

• Critical Circumstances is big worry

• But LONG TERM retroactive risk is real

story of AD/CVD case

Period

of

Review (“POR”)

(Defines

Covered

Imports)

Deposit Rates

Assessment

June 16, 2017

(Preliminary AD Notice expected)

Dec. 2018 Dec. 2019 Dec. 2020 Dec. 2021

July 2020 July 2021

“POR 1” “POR 2” “POR 3” “POR 4”

YYY%

POR 1

Final Result

ZZZ%

POR 2

Final Result

X1 % YYY% ZZZ%

Retroactivity (AD)

DOC

Final

(Nov.

1)

CVD

Order

(Dec.)

X2% X3%

July 2022

WWW%

POR 3

Final Result

What to Do?

• Understand the law

• Know your company’s risk tolerance (stay

in the game or exit?)

• Have robust compliance program; avoid

circumvention scams and “too good to be

true” solutions

• Importers survive and some thrive under

AD/CVD orders ( “winners and losers”)For-

Profit Whistleblower??

What to Do?

• DON’T SIT ON THE SIDELINES

• Only companies that participate in ITC and

DOC process have right to appeal to the

Court of International Trade

• Parties to CIT appeals can get injunction

delaying CBP final action while appeal is

pending For-Profit Whistleblower??

Where Importers Can Get Justice….

Court of International Trade

Federal Judges Have The Last Word on

DOC Actions

For-Profit Whistleblower??

Georgetown Journal of International

Law

• ??

CIT Remands DOC Decisions…

More than Half the Time!

• ??

• ”Statistics compiled by the CIT indicate that, between

2007 and 2012, of the 225 appeals filed …51.49%,

resulted in at least one remand …. Thus, when even

the highly deferential standard of review is used by the

CIT to scrutinize Commerce’s decisions, the data

confirm that more than half of Commerce’s decisions

that reach the court are unlawful in some respect.”

• “With such a low affirmance rate, Commerce’s

continued ability to assert itself as “master of the

dumping laws” can reasonably be questioned”

PREPARE FOR GOVERNMENT

CONTACTS

Prepare for Government Contacts

• ??

• Company Policy for Notifying

Management/GC/Outside Counsel of Government

Contacts

• Don’t let Gov request for information go unanswered!

• Routine-sounding “Request for Information” (Customs

Form 28) can blow up into audit or worse if not

handled properly

• Have plan in place to deal with in-person visits (ex,

DHS/ICE “drop by” visits at business, school parking

lot, etc.).

• Prepare for the worst (search warrant). It happens.

Call counsel immediately

• D&O policies; Lacey Act insurance

• Company speaks with ONE VOICE