Ignorance is Not Bliss – The Potential Perils of Antidumping and Countervailing Duties

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By April Collier, ABC Customs Brokers Jan 21, 2016

As an importer of foreign goods coming into the commerce of the United States, you already know how complicated the import formalities can be, and there is always more to learn. One subject that may not have appeared on your radar is that of trade laws such as Antidumping (AD) and countervailing duty (CVD).

What is Dumping?

Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer’s sales price in the country of origin, or at a price that is lower than the cost of production.

What are Countervailing Duties?

Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. Countervailing duties are assessed to counter the effects of the subsidies provided by foreign government to merchandise that is exported to the United States. These subsidies cause the price of such merchandise to be artificially low.

Measures of Protection for U.S. Industry

If a U.S. industry believes that it is being injured by unfair competition through dumping or subsidization of a foreign product, it may request the imposition of antidumping or countervailing duties by filing a petition with both Enforcement and Compliance and the United States International Trade Commission. Enforcement and Compliance investigates foreign producers and governments to determine whether dumping or subsidization has occurred and calculates the amount of dumping or subsidies.

According to the United States International Trade Administration, there are hundreds of antidumping cases for 44 US trading partner countries, including but not limited to countries as diverse as Argentina, Canada, Italy, China, Malaysia and Ukraine.  There are more active AD cases for goods manufactured in China than from any other country.

Products affected range from ironing boards to wooden bedroom furniture to ball bearings to engineered wood flooring, solar panels and cells; from honey to salmon, from shrimp to pasta to mushrooms. New cases are initiated frequently, while other cases are terminated.  AD rates can range from less than 1% to over 250% of the import value of the goods.

Customs Entry Requirements

With all antidumping cases, there are additional formalities and documentation that is required to be presented with the customs entry, no matter the AD rate. U.S. Customs and Border Protection will require that the customs entry include documentation certifying that you, the importer, are not being reimbursed by the manufacturer for the cost of the antidumping duties. Because AD cases are assigned based on information provided by the manufacturer to the ITA, and different firms may receive either higher or lower AD rates, it is important that you provide the full legal name and address of the actual manufacturer and the exporter, in order to ensure that the correct AD case is associated with your entry.

Customs Bond Underwriter Requirements

Due to the very high risks that U.S. customs approved bond underwriters assume when writing these required bonds, they are very likely to require that importers affected by antidumping regulations provide 100% collateral at the time of their bond application or roll-over. They will also require that the importer provide full financial information at that time. Providing collateral involves transferring either a certified check or a letter of credit, generally equal to 1-2 years of the importer’s continuous transaction bond. These funds or release of the letter of credit will be held by surety in order to protect them should there be an increase in Antidumping Duties (ADD) liability, and will not be returned to the importer until at least 180 days after the final entry has liquidated.  Many years can pass before an Antidumping case is closed, thus permitting liquidation of the entries.

Note: Depending on the importer’s history, volume and value of imports, the surety may require further collateral at any time.

Recommendations for Importers of New Products

You may well imagine that being unaware of a potential AD case on your product, discovering that your goods are subject to an unplanned additional duty can come as quite a shock, not to mention a tremendous expense.

ABC Customs Brokers recommends that you contact your customs broker or attorney prior to making purchasing decisions for goods that are new to your firm.  Our Trade Advisory team can assist you with research on the dutiability of the product and advise on eligibility for reduced or duty free treatments, in addition to determining whether it may be subject to Antidumping duties.

Understanding Antidumping or Countervailing Duties

To learn more about Antidumping or Countervailing duties attend an upcoming H.S. Tariff Classification Workshop.