Enforce and Protect Act Regulations Raise Risks for Importers

by John M. Peterson, guest columnist

New Customs Enforce and Protect Act regulations have exposed US importers to heightened risk of investigation and stiff penalties for any part they may play in evading antidumping or countervailing duties – AD/CVD – on products entering the US market.

The interim regulations implement Enforce and Protect Act – EAPA – provisions of the Trade Facilitation and Trade Enforcement Act of 2015 and became effective August 22.

Domestic industries – and some importers – have long complained that their foreign competitors routinely evade AD/CVD assessments. Indeed, a recent General Accountability Office (GAO) report concludes that the Federal Government is owed some $2.3 billion in uncollected duties for goods identified as being subject to AD and/or CVD orders.

The evaders use a variety of unlawful schemes. For example, they may transship goods through different countries to disguise their origin; or they may misdescribe goods on invoices and entry papers. (The term “honey laundering” was coined to describe transshipments of honey to avoid antidumping duties.)

Until now, one of the few remedies for companies facing competition from AD/CVD evaders has been to bring private “whistleblower” suits against them under the Federal False Claims Act.

The new EAPA regulations give these disgruntled parties a formal mechanism to compel Customs and Border Protection (CBP) to investigate claims of AD/CVD evasion. Further, they can challenge the results of CBP investigations in the courts, if necessary.

Briefly, the regulations enable any interested party to request a CBP investigation of an importer suspected to have evaded paying duties on shipments that entered the US during the past year. CBP has discretion to expand the investigation to earlier periods. Within 15 days of receipt of a properly documented request, CBP must advise the complainant whether it will investigate.

If there is to be an investigation, CBP has 300 days (360 for “extraordinarily complicated” cases) to complete it and report its determination. Thereafter, parties to the investigation may ask CBP for an administrative review of the decision. Parties unhappy with the final results of investigation may challenge them in the US Court of International Trade.

The regulations call for a relatively transparent investigative process, where information is placed on a public record, and both complainants and the targets of the allegations have an opportunity to comment. CBP can elect any method to conduct investigations, including issuing questionnaires to importers, foreign producers, exporters and others.

New risks for importers

There are new risks for importers in the Enforce and Protect Act regulations: Within the first 90 days of an investigation, CBP can reach a preliminary determination and take interim action against the importer.

The threshold for imposing interim action is low, grounded in “reasonable suspicion” rather than proof. For example, the CBP may act based on “adverse inferences” made because a foreign seller did not answer a Customs questionnaire in a manner deemed acceptable.

The interim actions against the importer can be harsh. They include suspending liquidation of entries, requiring the importer to post cash deposits of estimated antidumping or countervailing duties, and imposing special bonding requirements. These are penalties which can drive some importers out of business.

Once imposed, these interim measures would appear to remain in place until the final determination. If there is a final determination of evasion, CBP may continue the suspension of liquidation of entries and the collection of duties, and may also impose civil penalties or refer the matter for criminal prosecution.

In addition to raising new risks for importers, the EAPA regulations will likely raise a crop of thorny legal issues.

Until this point, the Commerce Department has been the agency responsible for administering the AD and CVD laws, with Customs acting in a purely “ministerial” capacity – that is, taking instruction from Commerce.  Now Customs will begin taking direct action.

Suppose, then, that Customs preliminarily determines that a product described as originating in Vietnam is actually made in China and so subject to AD duties. Customs takes interim action, requiring the importer to deposit estimated antidumping duties on an entry. The determination is subsequently upheld by the CIT. The entry liquidates with a final assessment of duties.

Can this importer protest the assessment and seek to prove in court that the product is really of Vietnamese origin? The Tariff Act [19 U.S.C. §1514(b)] prohibits importers from protesting antidumping decisions by Commerce. But, since the determination was made by Customs, not Commerce, there would appear to be no impediment to filing a protest.

CBP’s newly-formed Trade Remedy Law Enforcement Division is expecting a slew of requests for investigations under the new regulations. (You can read about the first, filed by Wheatland Tube and charging evasion by Chinese imports of circular welded steel pipe, in Steel Market Update.)

Fasten your seatbelts – the business of importing is about to get a lot riskier.

For more information

The new Enforce and Protect regulations are effective August 22. The CBP is accepting public comments on them until October 21 (comments can be filed and reviewed at the Federal eRulemaking Portal via docket number USCBP-2016-0053). Find the full text of the regulations in the Federal Register. For a complete analysis of the new regulations, see the Neville Peterson LLP Trade Law Blog.

Updates: The deadline for public comments on EAPA regulations has been extended from October 21 to December 20, 2016. CBP has opened an EAPA webpage:  -Editor 10/26/16.

About John M. Peterson

Enforce and Protect Act regulations: John M. Peterson surveys new risks to importers

(Michael McWeeney / February 17, 2015)
These photos are protected under international and domestic copyright law. For more information contact Michael McWeeney

John M. Peterson is a Partner at Neville Peterson LLP, New York City and Washington D.C.  He can be reached at (212) 635-2730 or at [email protected].

The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.


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