U.S. Customs and Border Protection (CBP) has issued new interim regulations to remedy and penalize evasion of antidumping and countervailing duties (AD/CVD) orders.  The regulations, which became effective August 22, 2016, establish procedures and deadlines for CBP to respond to petitions alleging that U.S. importers have avoided or reduced AD/CVDs by misrepresenting merchandise as it enters the United States.  The regulations were issued pursuant to the Enforce and Protect Act of 2015 (Enforce Act), which was signed into law on February 24, 2016 and we previously wrote about here.

The new investigations threaten to be costly for U.S. importers and foreign manufacturers.  As detailed below, even an importer that exercises reasonable care might end up being dragged into a costly investigation based on inaccurate information provided by a supplier.

Upon initiation of an investigation, CBP may require U.S. importers, the foreign manufacturers of merchandise or foreign governments to respond to questionnaires.  If a U.S. importer or foreign manufacturer fail to respond to a CBP inquiry, CBP can use adverse inferences in the investigation, which likely would result in CBP increasing duty deposits on import entries.  Adverse inferences cannot be used if a foreign government fails to respond to a CBP inquiry.  Questionnaire responses are also subject to potential CBP on-site verification.

In addition, CBP may retroactively impose AD/CVDs on imported merchandise through the evasion investigative process.  The regulations set forth that CBP can suspend liquidation of entries that are subject to an investigation, which includes entries dating back one year from an allegation of evasion.  In addition, CBP’s regulations discuss the possibility of extending liquidation on imports entered more than one year before an allegation of evasion is filed and the possible reliquidation of entries, which is permitted only in rare circumstance under U.S. law.

CBP’s new regulations provide the following:

• U.S. petitioners and foreign manufacturers may allege evasion against their competitors.
• CBP will initiate an investigation if it finds a “reasonable suspicion” exists that an importer has evaded AD/CVD orders.  CBP will make a final determination that evasion occurred if substantial evidence supports such a finding.
• CBP is required to initiate an investigation within 15 business days of the receipt of a properly filed allegation from an interested party or a referral from another federal agency that reasonably suggests that merchandise covered by an AD/CVD order has entered the United States through evasion.
• If CBP decides not to initiate an investigation, it will notify the party that filed the allegation within five business days of the decision.  If CBP decides to initiate an investigation, it will notify all parties to the investigation no later than 95 calendar days after it has done so.  CBP will use that 95-day period to investigate the allegation it has received.
• The statute requires that CBP issue its final determination of evasion within 300 calendar days after it has initiated an investigation or 360 days in extraordinarily complicated cases.
• CBP may suspend its regulatory deadlines if a U.S. Department of Commerce scope ruling is necessary to determine whether evasion has occurred.
• CBP can punish parties under other relevant law, including assessing penalties against U.S. importers for failing to exercise reasonable care in importing merchandise.  Such penalties could be in addition to AD/CVDs.

Although CBP’s new regulations are now in effect, they are considered “interim” and CBP has requested comments on the new regulations.  Comments must be submitted by October 21, 2016.  CBP could modify its regulations after reviewing the interested party comments.

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