New CBP AD/CVD Evasion Investigations to Hit Small Importers Hard, Says Lawyer
NEW YORK – Simply getting caught up in one of CBP’s new antidumping and countervailing duty evasion investigations could prove a death knell for small importers with even the best of intentions, said a lawyer who represents importers during a seminar held on April 22 by the Customs and International Trade Bar Association. The low bar set for beginning investigations and imposing provisional duties, which could trigger higher collateral requirements from the importer’s surety, makes it a risky proposition for any small importer to bring in anything from China subject to an AD/CVD case, said David Forgue of Barnes Richardson during a panel discussion on the CBP’s new anti-evasion regime.
Section 421 of the Trade Facilitation and Trade Enforcement Act of 2015 requires that CBP begin an investigation if an allegation “reasonably suggests” AD/CVD evasion, and authorizes suspension of liquidation and cash deposit requirements if the agency has after 90 days a “reasonable suspicion” of evasion (see 1602230080). “Reasonable suspicion is very low threshold,” said Forgue. “I run my entire life on reasonable suspicion.” For small importers, that’s where the investigation will effectively end, Forgue said. If CBP suspects evasion in its 90-day finding, CBP may require cash deposits upward of 200 percent, and the importer’s surety will ask for dollar-for-dollar collateral on all the importer’s open entries, putting the importer out of business. “If you’re a small importer, if you had that kind of money you would just retire,” he said.
The provisions will largely affect importers, and not just crooked ones, said Forgue. “This law will not in any meaningful sense apply to manufacturers in China” or “to people running scam warehouses in Singapore,” who are causing the most harm, said Forgue. Worse, though the law provides for judicial review at the Court of International Trade, the fact that importers will be out of business by the time the process is complete means their cases likely won’t get there. “I don’t think there’s any remedy in the law for these people,” he said.
The new risks posed by evasion investigations mean importers should be wary of importing from China unless they get a scope ruling before they import. Even if the Chinese exporter has a low “separate rate” and has “told you over dinner they’d never skip a questionnaire,” if they do and end up with a high punitive duty, “you’re toast,” said Forgue. “Even if someone swore up, down, left, right and center that it would all become Singapore goods” by shipping through Singapore “and it won’t be subject to duties, it doesn’t matter how much good faith you have as an importer.” If an importer gets caught up in such a scheme and an allegation is filed, “that 90th day, they will make it untenable for you to stay in business,” he said.