I Just Found Out My Imported Goods are Subject to Antidumping - What Should I do?
Currently there are close to 400 active antidumping cases involving nearly 40 countries. The cases cover a wide range of products including steel commodity products and steel articles (number one category), chemical products, other metal commodities and articles, plastics and rubber products, food products, paperboard and manufactured articles. Key countries subject to ADD are China (number one country by far), Korea, Indonesia, Taiwan, Thailand, Turkey, and Vietnam.
Dumping is “the sale or likely sale of goods at less than fair value”, and the purpose of antidumping laws is to provide a remedy against unfairly traded imports that cause harm to a domestic industry. Countervailing Duties are duties levied on an imported good to offset subsidies to producers or exporters of that good in the exporting country. The remedy for both is in the form of additional duties levied on products deemed to be traded unfairly or unfairly subsidized in order to “level the playing field.”
Under CBP’s “reasonable care” standard, importers are expected to exercise due diligence and understand the full range of regulatory requirements that may apply to their goods upon importation. However, in many cases importers may not be aware that their products are subject to AD / CVD for a variety of reasons. Unsophisticated importers, with few if any customs compliance processes and procedures, are frequently unaware that AD / CVD even exists, let alone apply to their products.
A very familiar scenario involves an importer of record receiving a notice from CBP such as a Customs Form 28 Request for Information or a notice of rejection of an entry and demand to re-file as an AD / CVD entry with the payment of AD / CVD duties. This can be the initial step in a process that can turn out to have long-lasting consequences. AD / CVD duties can be very high, in some cases exceeding 400% of the shipment value. Furthermore, in many cases importers may have previous shipments of the same or similar products imported without knowledge that AD / CVD may apply. Under the U.S. Customs Section 592 penalty statute, CBP can reach back five years (the applicable Statute of Limitations period) to collect unpaid AD / CVD, as well as impose significant penalties. The resulting liability here can be more than enough to put a small company into bankruptcy.
In these cases, it is very important that the importer seek qualified counsel to navigate the situation. In general, as a first step the importer will need to carefully review the claim that the imported products are subject to AD / CVD and either verify that the products are “within the scope” of the particular AD / CVD order, or determine whether there are arguments that the products are not covered, and AD / CVD does not apply. In most cases, once CBP has made a determination that AD / CVD applies to a product, rebuttal arguments, no mater how persuasive, will not result in a reversal of the determination. Rather, CBP will require a formal scope ruling be obtained from the Department of Commerce (DOC) to decide the issue. This in itself is a complex undertaking requiring the assistance of experienced counsel and can be fairly expensive.
As the scope of many AD / CVD orders are crafted broadly, when a product is flagged as being covered by an AD / CVD order, in many cases the above examination confirms the product is “in scope” and that AD / CVD applies. In this case it is necessary to perform a review to determine whether this is an isolated occurrence or whether there have been previous importations of the same merchandise that would also be subject to AD / CVD. In cases where the results of the product review are unclear as to whether the goods are actually subject to AD / CVD, it may be worthwhile to request a scope ruling from the DOC in an effort to obtain a ruling that the products are out-of-scope. For certain AD / CVD cases, due to the nature of the differing products potentially covered or difficulty interpreting the scope of the orders, there can be hundreds of scope ruling requests related to a single AD / CVD case.
Should the importer determine that it has imported products that are indeed covered by AD / CVD, in most cases it is advised to submit a voluntary disclosure to CBP. Customs’ Section 592 penalty statute permits importers to voluntarily disclose errors related to previous importations, even if they have been put on notice by CBP in the form of a CF-28 Notice or notice of entry rejection. Under the statute, provided the importer makes a full and complete disclosure of all potential errors going back five years, only the unpaid duties must be paid, along with statutory interest from the date of entry, and no penalties will be assessed. It is important to note however that all voluntary disclosures are subject to audit by CBP, and all disclosable errors discovered in the five-year lookback review must be disclosed, even if not related to AD / CVD or they remain subject to CBP investigation and potential penalties.
In worst-case scenarios involving importers with multiple previous importations involving significant AD / CVD liability, importers may determine that they simply cannot absorb the AD / CVD and remain in business. Short of reorganizing the AD / CVD liability through bankruptcy (which might end up being the only viable option) CBP has permitted companies to enter into payment plans of two-to-three-year duration with modest interest rates. CBP requires proof of inability to pay by requesting previous year’s tax returns and audited financial statements and requires importers to execute a promissory note.
In cases where an importer does not have the assets to pay their outstanding AD / CVD liabilities, even under a payment plan, but does not want to seek bankruptcy protection, pursuant to 19 U.S.C. §1617 and 19 CFR §161.5, an importer can submit an Offer in Compromise in attempt to settle the liability. An Offer in Compromise is a request that CBP accept less than the full amount of the AD / CVD liability in order to resolve the claim when the importer otherwise does not have the means to pay the full amount. The importer must demonstrate that they do not have the means to pay by submitting previous tax returns, financial statements, and bank account statements, and must include with the request either the full amount of the offer in compromise payment, or the first installment if proposing to pay the amount in installments under a payment plan. If CBP accepts the offer, the matter is closed. If they reject it, the amount of any payment is returned to the importer.
In conclusion, finding out that current, and possibly previous importations of goods are subject to AD / CVD presents a difficult and possibly financially challenging situation for an importer that can place the livelihood of the business at risk. It is therefore critical to manage CBP’s claims carefully and understand all options in order assure the best possible outcome.