The United States uses a retrospective system for assessing and collecting antidumping and countervailing duties (AD/CVD) on imports. While the United States is the only major country that uses the retrospective system, it has done so since the antidumping laws were enacted in 1921. In other words, the retrospective determination of AD/CVD liability and duty collection is a fundamental feature of the US’s AD/CVD system.
Yet, after more than 90 years under the current duty assessment system Congress may be rethinking this practice. In December 2010, responding to a request from Congress,1 the US Department of Commerce, together with the Departments of Homeland Security and Treasury, submitted a Report to Congress on the relative advantages and disadvantages of a prospective versus retrospective duty collection system.2 Congress’ recent interest in this matter follows a report from March 2008 by the Government Accountability Office3 which found under-collection of AD/CVD duties and concluded that the US Government had two options for resolving the problem: 1) Congress could fundamentally change the US AD/CVD system from a retrospective to a prospective duty collection system, or 2) Congress and the relevant agencies could alter specific aspects of the current retrospective system.
Under the current system, importers must pay cash deposits equal to the estimated AD/CVD duties applicable to goods that enter the United States at the time of importation. The AD and CV duty rates can change as a result of administrative reviews or judicial review of Commerce’s determinations. There are several variations of prospective duty assessment systems. Generally, in a prospective duty system, duty rates are calculated based on data regarding historical levels of dumping and subsidies, and those rates are applied to future entries of goods at the time of importation.
Commerce’s newly issued Report to Congress4 addresses the extent to which each type of system would likely achieve the following six goals: 1) remedying injurious dumping or subsidized exports to the United States; 2) minimizing uncollected duties; 3) reducing incentives and opportunities for importers to evade antidumping and countervailing duties; 4) effectively targeting high-risk importers; 5) addressing the impact of retrospective rate increases on US importers and their employees; and 6) creating minimal administrative burden. While the Report does not contain a formal recommendation or conclusion by the three agencies involved (Commerce, Homeland Security and Treasury), the likely take-away is that a prospective assessment system is not an easy solution to the current concern of under-collection of AD/CVD duties. Under a prospective system it is estimated that Homeland Security (Customs) will have increased responsibility of computing the AD/CVD liability for imports, based on thousands of transaction-specific and product-specific normal values for each case that would be periodically determined by Commerce and communicated to Customs. While this is feasible for some countries, such as Canada which administers 36 AD orders and 9 CVD orders, the Report notes that the administrative burden for the United States, which had 251 AD cases and 36 CVD case as of June 2010, would be enormous. In sum, despite some benefits, a move to a prospective system may result in a system that is equally, if not more, burdensome as the current retrospective system. Commerce’s Report, while not a endorsement of a prospective duty assessment system, highlights the shortcomings of the current system, as well.
It is now up to Congress to weigh the positives and the negatives of the two systems. Whether it comes in the form of a fundamental change of system or more stringent requirements on importers under the current retrospective system, some degree of change is to be expected. If the latter option prevails, concrete proposals may be issued for comment as early as 2011.