On August 22, 2016, US Customs and Border Protection (CBP) and the Department of the Treasury published a set of interim regulations setting forth new procedures for CBP to investigate claims of evasion of antidumping (AD) and countervailing duty (CVD) orders (the “duty evasion investigations.”).1 The interim regulations seek to address a closely watched issue regarding US AD and CVD proceedings: Private parties that may benefit from the collection of AD or CV duties, including relevant US producers and competing importers, are now accorded their day in court, although the process starts with CBP.

On February 24, 2016, President Obama signed into law a new trade act that contains Title IV-Prevention of Evasion of AD and CVD Orders (EAPA).2 The interim regulations were required by section 421 of the EAPA. By way of background, lack of enforcement of AD and CVD orders is widely considered in the United States to be a serious endemic. In May 2012, the Government Accountability Office (GAO) issued a report titled “Management Enhancements Needed to Improve Efforts to Detect and Deter Duty Evasion.” This report called for more robust CBP efforts to address AD and CVD order evasion and facilitate oversight of these efforts.3 Recently, in August 2016, another GAO report examined a related issue of non-payment risks associated with CBP’s efforts to collect AD and CV duties,4 which quickly gathered the support of a critical federal lawmaker.5 It was against this backdrop that the new interim regulations targeting evasion of AD and CVD orders were issued.

The interim regulations now obligate CBP to investigate private duty evasion allegations that have reasonable factual support. This new mandate to act on private allegations does not take away the agency’s traditional enforcement authority. Under pre-existing customs laws, CBP can take enforcement actions against an evasion of AD and CVD orders, which include the assessment of civil penalties against offending importers. In addition, a fraudulent scheme to evade AD duties has led to a criminal prosecution of the offending importer.6 However, AD and CV duty evasion allegations submitted by private parties prior to the implementation of the EAPA did not afford the complaining parties an opportunity to participate in a resultant investigation. Also, CBP used to have no obligation to notify the complaining parties of the outcome of the agency’s investigation. Both above-mentioned problems have been addressed in the August 22 interim regulations. Meanwhile, the interim regulations made clear that CBP retains the authority to use information obtained during an EAPA investigation to impose penalties under its traditional civil enforcement tool (19 U.S.C. § 1592). 

The August 22 interim regulations provide for the definition of ‘‘evade’’ and ‘‘evasion.” In the current context, these terms refer to entering merchandise subject to a US AD or CVD order (the “covered merchandise”) for consumption by means of any document or electronically transmitted data or information, written or oral statement or act that is material and false or to any omission that is material and that results in any cash deposit or other security or any amount of applicable AD or CV duties being reduced or not being applied. Hence, falsely reporting the country of origin or physical nature of the goods falls squarely within the ambit of the interim regulations. As to who may make a duty evasion complaint, US producers of a domestic like product are typically who allege wrongful importer actions to evade AD and CVD orders. The new interim regulations also give standing to importers of the covered merchandise who wish to bring evasion allegations against competing importers. These competing importers are included in the definition of “interested parties.” A duty evasion investigation may also be requested by a federal agency, including the Department of Commerce or the United States International Trade Commission.

Regarding the new investigation procedures, generally CBP will decide whether a duty evasion investigation is warranted within 15 business days after the receipt of a properly filed allegation. If CBP decides to not initiate an investigation, the complainant will be informed within five business days of that determination. Conversely, CBP will notify all known parties to a duty evasion investigation no later than 95 calendar days after the initiation of the investigation. A CBP determination as to whether duty evasion occurred will be made within 300 calendar days from the date of initiation of the investigation, with a 60-day extension reserved for “extraordinarily complicated” investigations. The parties to the investigation will be notified within five business days of the initial determination by CBP. They also have up to 30 business days after the date of the initial determination to request an administrative review by Regulations and Rulings, Office of Trade, which is a branch of CBP. The final administrative determination issued thereby is subject to judicial review in accordance with section 421 of the EAPA.

In publishing the interim regulations, effective August 22, 2016, CBP also seeks public comments on their contents and requires that all comments be received by October 21, 2016. All parties concerned with a covered merchandise should take notice of the interim regulations bringing private AD and CV duty evasion allegations into the process. Opportunities and risks coexist as CBP tees up its efforts to strengthen the enforcement of AD and CVD orders. The clock is already ticking on taking advantage of the public comment period.

1 Investigation of Claims of Evasion of Antidumping and Countervailing Duties, 81 Fed. Reg. 56477 (Aug. 22, 2016).
2 Pub. L. 114– 125, 130 Stat. 122, 155 (Feb. 24, 2016); 19 U.S.C. 4301 note.
3 GAO, Management Enhancements Needed to Improve Efforts to Detect and Deter Duty Evasion (May 2012, available at http://www.gao.gov/assets/600/590917.pdf.
4 GAO, CBP Action Needed to Reduce Duty Processing Errors and Mitigate Nonpayment Risk (Jul. 2016), available at http://www.gao.gov/assets/680/678419.pdf.
5 House Ways and Means Chairman Kevin Brady (R-TX), Brady Statement on GAO Report on Antidumping and Countervailing Duty Collections (Aug. 15, 2016) (press release), available at http://waysandmeans.house.gov/brady-statement-gao-report-antidumping-countervailing-duty-collections.
6 Mayer Brown Legal Update, The Continuing US Trend to Criminalize Customs Violations (Oct. 30, 2012), available at https://www.mayerbrown.com/The-Continuing-US-Trend-to-Criminalize-Customs-Violations-10-30-2012.