For years, domestic producers have expressed frustration over the Department of Commerce’s (DOC) lack of ability to investigate specifically perceived evasion of the U.S. antidumping and countervailing duty laws. At the same time, domestic producers have complained that U.S. Customs and Border Protection (CBP) has been unable to combat circumvention of those laws. Congress, DOC, the Department of Justice (DOJ) and criminal prosecutors are now taking action in an attempt to stem the tide of circumvention.

Two U.S. Senators recently introduced legislation to give DOC and CBP more authority and tools to combat circumvention. In August 2010, Sens. Ron Wyden (D-Ore.) and Olympia J. Snowe (R-Maine) introduced legislation – The Enforcing Orders and Reducing Circumvention and Evasion (ENFORCE) Act of 2010 – that:

  • Specifically empowers DOC to investigate fraud, transshipment of imports through a third country to avoid payment of duties, and document falsification or mislabeling.
  • Allows interested parties to submit petitions to CBP alleging circumvention and evasion of antidumping and countervailing duties, and sets specific deadlines for completion of the circumvention and evasion investigation.
  • Requires CBP to collect cash deposits of estimated antidumping or countervailing duties until CBP concludes its investigation, if CBP makes an affirmative preliminary determination that a reasonable basis exists to believe an importer is evading an antidumping/countervailing duty order.

To date, this legislation has been referred to the Senate Finance Committee, but has not progressed beyond this stage.

In an attempt to gain support for the ENFORCE Act, Sen. Wyden asked one of his staff members to pose as a representative of a U.S. company to see if Chinese companies would agree to help circumvent and evade antidumping duties. The staff member contacted a number of Chinese companies by e-mail, requesting their assistance with importing Chinese products into the United States by evading existing antidumping orders. According to a press statement released by Sen. Wyden, during a two-week period, the staff member received e-mails from 10 different Chinese companies interested in committing this type of fraud. Through e-mail correspondence, Chinese manufacturers of products subject to antidumping and countervailing duty orders – ranging from steel nails to diamond saw blades – expressed interest in assisting in circumventing these orders so that no antidumping duties were paid.

In addition to the proposed legislation, DOC has introduced its own proposals to combat fraud in antidumping and countervailing duty investigations. Specifically, DOC has encountered a rash of cases in which it has caught foreign manufacturers lying or creating false documents. Among other proposals, DOC aims to combat this issue by strengthening the certification process for factual information submitted by foreign exporters in antidumping and countervailing duty cases.

The proposed ENFORCE Act and DOC’s certification proposals, however, pale in comparison to the recent criminal indictment of Chinese, German and U.S. companies and individuals that allegedly evaded nearly $80 million in antidumping duties on honey imported from China. For the first time, DOJ used a criminal obstruction law (18 U.S.C. § 542) to bring criminal charges against foreign exporters and U.S. importers that were circumventing the U.S. antidumping law. Some of the specific acts by the foreign exporters and importers included falsifying CBP entry forms and sales documentation, instructing the foreign producers and importers not to write e-mails about their activities, and directing them to delete documents and e-mails in case DOC conducted a verification audit. This case is significant because the criminal penalty under the obstruction statute – fines and up to 20 years in prison – is much more severe than the criminal penalties usually faced by importers.

If the use of the criminal obstruction statute becomes the norm for DOJ and prosecutors in combating the circumvention schemes to evade payment of antidumping and countervailing duties, then the importers and foreign producers that engage in or attempt to engage in this activity should be worried. Given this heightened scrutiny and likely increased investigation of potential circumvention in antidumping and countervailing duty cases, foreign producers and importers should consult with trade counsel to confirm that their importing activities comply with U.S. antidumping, countervailing and U.S. Customs laws.