Enforce and Protect Act’s Unfair Trade Remedy – Whistleblowing

by John M. Peterson, guest columnist

For a domestic manufacturing industry struggling against unfair import competition, few things can be as frustrating as going through the long, high-cost process of obtaining an antidumping (AD) or countervailing duty (CVD) order against the unfairly traded imports, only to be denied the promised relief.

Now the Enforce and Protect Act (EAPA) provisions of the Trade Facilitation and Trade Enforcement Act of 2015, which became effective August 22, 2016, offer domestic producers, or competing importers, a new remedy for unfair trade: Whistleblowing.

EAPA's unfair trade remedy encourages whistleblowers to file allegations of AD/CVD evasion As described in my earlier blog post [Enforce and Protect Act Regulations Raise Risks for Importers], EAPA allows interested parties to file formal allegations of AD/CVD evasion with US Customs and Border Protection. CBP then has a limited time in which to conduct an investigation into the charge.

Within days of the new EAPA regulations becoming effective, Wheatland Tube, a division of Zekelman Industries that manufactures steel pipes and tubes, announced it had filed an EAPA allegation of evasion. According to this report, on October 17, CBP informed Wheatland it would not initiate an investigation, stating that Wheatland’s “allegation reasonably suggests that Company ‘X’ imported merchandise from China that may be subject to AD/CVD order. But the allegation does not reasonably suggest that merchandise was entered through evasion.”

Unfair trade remedy – data required

CBP’s regulations impose a number of requirements on whistleblowers.

An allegation may only target a single evader (although multiple allegations against an evader may be combined for an investigation).

An allegation must provide some evidence concerning evasion associated with an entry happening within the past year. The one-year requirement is important: It allows Customs to take action on import entries before they have been “liquidated” and otherwise made final. The EAPA is not intended for investigation of older or stale claims of evasion (although Customs may take penalty action against such claims).

The “one year” requirement also means that access to trade data is likely to be important to a party filing in the EAPA allegation. Vessel manifest data, for example, can be used not only to confirm rumors of a suspected incident of evasion, but also to identify other entries which fit the pattern of possible evasion and merit investigation by Customs.

In fact, trade data may well play a bigger role in EAPA cases than in other forums in which AD and CVD evasion allegations are made.

For example, whistleblowers have alleged evasions under the “reverse false claims” provisions of the Federal False Claims Act (FCA) – but the FCA requires that informants base their claims on non-published data. Trade data, such as vessel manifest data or information in US International Trade Commission reports, has been held to be published data and so cannot support a FCA claim. However, there is no limitation on using this trade data in EAPA claims – and it is expected that such data will be extensively used to build EAPA cases.

Note that domestic manufacturers are not the only ones who can use EAPA’s unfair trade remedy. Importers who comply with AD and CVD rules, but are frustrated by competitors who they know or suspect do not, can also blow the whistle on unfair trade.

Standards for EAPA allegations

For now, Customs is proceeding on the basis of “interim” regulations, while seeking comment on potential regulatory amendments [see below].

Some importers have expressed concern that the system established by the interim regulations lacks transparency. Targets may not even know they are under investigation until action is taken against their imports. Trade groups such as the American Institute for International Steel (AIIS) worry that some firms may file EAPA complaints simply to disrupt competitors’ supply chains.

Importers wonder whether the filing of an EAPA complaint against them cuts off their right to make penalty-avoiding “prior disclosures” to Customs of any violations they discover through internal review or routine interactions with Customs officials. In this regard, it should be noted that not every failure to tender AD/CVD duties is the result of nefarious intent. In many cases, importers may simply misunderstand or misinterpret the (often vague) scope language used to describe goods subject to these orders. [See, e.g., HS code descriptions.]

Customs’ rejection of the Wheatland Tube complaint indicates that the agency intends to hold informants to a high standard of accuracy in making EAPA allegations. As more potential complainants file EAPA petitions, the standard will become clearer.

In recent decades, as Customs had shifted from its historical practice of reviewing every import entry to a system of “automatic bypass” in which entries are processed without being examined, the opportunities for duty evasion have grown.

While Customs has relied on a system of post-entry audits for enforcement purposes, these remedies, when they bear fruit, often come too late to do any good for the domestic concerns that the antidumping and countervailing duty laws are intended to protect. The EAPA provides another method for interested members of the public to take affirmative action to help in the enforcement of the nation’s trade laws.

For more information

The new Enforce and Protect regulations are effective August 22. The CBP is accepting public comments on them through December 20 (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.

About John M. Peterson


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

Neville Peterson LLP NY staff
(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 mailto:[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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