Court Ruling on AD/CVD Scope Interpretation Could Up Enforcement, Lead to Unwelcome Surprises, Lawyers Say

A recent court decision on CBP’s authority to suspend liquidation of entries it suspects are covered by antidumping and countervailing duties cements the agency’s stance into one of stricter enforcement and could create some headaches for importers of some goods that are not clearly covered by AD/CVD orders, customs lawyers said in the wake of the ruling.

Issued Jan. 7, the Federal Circuit’s en banc opinion says CBP can interpret AD/CVD orders, even when ambiguous, when making decisions related to the release of goods (see 2001080057). That’s a reversal from the appeals court’s own decision from some months earlier, wherein it found only Commerce had that authority (see 1905170047). Practically, it means does CBP not have to wait for a Commerce scope ruling when it’s unclear whether AD/CV duties apply to an entry.

That could mean another swing of the pendulum for CBP’s treatment of goods potentially subject to AD/CVD. “I know some years ago, CBP would be willing to hold off on collecting dumping duties if a company decided to seek a scope ruling from Commerce,” said Paula Connelly of Sandler Travis. Now CBP is going to be able to come to its own decision on whether a product is covered by the scope, she said.

The scopes of many AD/CVD orders “are ambiguous to say the least,” Connelly said. “With so much focus on AD/CVD today, it just provides them with a better opportunity to collect at the time of entry.”

Already under scrutiny over AD/CV duty collections, CBP port personnel will likely lean more often than not toward suspending liquidation when an order is ambiguous. “Customs will generally err on the conservative side and assume that merchandise could be subject to AD,” said Richard Wortman of Grunfeld Desiderio. “Import Specialists are under significant pressure to protect the revenue. The real problem is that with high AD rates, an importer may not still be in business by the time the scope of the merchandise is determined,” he said.

The upshot is that importers with a good faith belief that their imports are outside the scope of AD/CV duties could face an unpleasant surprise. “Prior to this decision, before CBP could suspend the liquidation of the entries, someone would have to ask CBP to commence a scope inquiry,” said Larry Friedman on his blog. “Presumably, this would give the importer notice of the risk and the ability to both participate in the inquiry and, if needed, make changes to its supply chain.”

“It is possible that this decision in not widely applicable,” Friedman said. “The starting point is that there is ambiguity in the scope of an order and that the imported goods fit within the ambiguity. This is already a narrow Venn diagram,” he said. “But, for those case[s] where it does apply, importers are at greater risk unexpectedly of being assessed AD and CV duties.”