On February 11, 2016, Congressional leaders announced passage of the Trade Facilitation and Trade Enforcement Act of 2015, H.R. 644, a law that will enhance the United States’ trade enforcement efforts. The bill, which passed the House of Representatives by a vote of 256-158 and the Senate by a vote of 75-20, overcame a standoff between the House and the Senate over antidumping (AD) and countervailing (CVD) duty evasion, currency manipulation, and other contentious provisions. The White House has announced that it will sign the bill into law.
The Act addresses a number of key trade issues, including import-related intellectual property rights, currency manipulation, and import health and safety. Of particular note are the legislation’s AD and CVD enforcement provisions.
The Act (1) mandates that U.S. Customs and Border Protection (CBP) act to prevent evasion of AD and CVD duties through a new process with strict deadlines, (2) ensures that distributions required by the now repealed Continued Dumping and Subsidy Offset Act (Byrd Amendment) are made, (3) creates new oversight of trade enforcement by the U.S. Trade Representative (USTR), (4) establishes the Interagency Center on Trade Implementation, Monitoring, and Enforcement (ICTIME), and (5) creates an early warning system to identify trade surges from unfair trade.
The Act could be a significant new source of risk for importers, allowing competitors (both foreign and domestic) and other interested parties (such as labor unions) to make allegations of duty evasion that must be formally investigated by CBP.
The Enforce and Protect Act of 2015
Title IV of the Trade Facilitation and Trade Enforcement Act of 2015 act contains the Enforce and Protect Act of 2015 (Enforce and Protect Act) relating to AD/CVD evasion. Finance Committee Ranking Member Ron Wyden (D-Ore.) and Senator Susan Collins (R-Me.) previously introduced the ENFORCE Act in 2011, where it eventually passed the Senate Finance Committee by voice vote but never reached a vote on the Senate floor.
The bill amends the Tariff Act of 1930 to provide procedures for CBP to investigate allegations of AD and CVD duty evasion as follows:
- Competitors, unions and other federal agencies may bring allegations to CBP: The Enforce and Protect Act allows CBP to accept allegations from “interested parties” regarding AD and CVD duty evasion. “Interested parties” include U.S. producers, manufacturers, or wholesalers of merchandise that are like or most similar to merchandise covered by an AD or CVD order that is allegedly entering the United States through evasion. Other federal agencies (e.g., the U.S. Department of Commerce) may also submit referrals to CBP. Additionally, the term “interested parties” includes trade and business associations with a majority of members that are producers, exporters or importers. Unions can also qualify as interested parties.
- Investigation timeframe: Upon receipt of a proper allegation, CBP must initiate an investigation within fifteen (15) business days. CBP must then make a determination within 300 calendar days whether substantial evidence exists that merchandise has entered the United States through evasion.1 Within five days of the final evasion determination, CBP must notify each interested party that filed the allegations prompting the investigation. The interested party then has 30 business days to request de novo review of the determination by CBP. Determinations of evasion are subject to judicial review after administrative review of the determination.
- Information requests: The bill authorizes the Commissioner to request information from several parties, including the interested party making the allegation, the importer, the foreign producer, the foreign exporter, and the government of the foreign country from which the merchandise was exported. If the importer, exporter, foreign producer, or U.S. producer making the allegation fails to provide information to the best of its abilities, the Commissioner may make an adverse inference in reaching its evasion determination.
- Determination: If CBP finds within 90 days that reasonable suspicion exists that covered merchandise entered the United States by means of evasion, the Commissioner must take enforcement steps. CBP has nine months after initiating an investigation to make an evasion determination.
- Appeals: Before an appeal to the U.S. Court of International Trade (CIT), a party would have to exhaust two administrative CBP proceedings – (1) obtaining an initial determination whether evasion is occurring, and then (2) seeking “de novo” review within CBP. Parties may not appeal a CBP decision not to launch an investigation. CIT review applies both to the agency’s discretion and to its compliance with procedures.
- Penalties: If CBP finds that reasonable suspicion exists that covered merchandise entered the United States by means of evasion, CBP must:
- Suspend the liquidation of any unliquidated entries of covered merchandise entered after the initiation of the investigation,
- Extend the period for liquidating any unliquidated entries of covered merchandise entered before the initiation of the investigation, and
- Take additional measures to collect duties, such as requiring a bond or posting cash deposits for covered merchandise.
- Remedy: If CBP finds duty evasion, the remedy is focused on collecting the duties that importers have failed to pay. CBP can also request that the U.S. Immigration and Customs Enforcement section of the Department of Homeland Security pursue civil or criminal investigations.
- In addition, if CBP ultimately makes an evasion determination, the Commissioner must notify the Commerce Department for a determination of appropriate duty rates and take additional enforcement measures, such as requiring a deposit on future entries or referring the matter to ICE for civil or criminal investigation.
The new law’s provisions, as Senate Finance Committee Ranking Member Ron Wyden (D-OR) has noted, create “tough new trade enforcement policies” and could have strong implications for foreign exporters and domestic importers of goods into the United States.
Special thanks to Sean Carlesimo for his contributions to this update