Customs & Trade Alert
November 2010
U.S. Government Goes on Offensive
to Attack Circumvention of U.S.
Trade Laws
By: Douglas J. Heffner
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
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Customs & Trade Alert
November 2010
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.
*
*
*
Douglas J. Heffner is a partner in the Customs & Trade practice of Drinker Biddle & Reath
LLP. He has a broad-based practice in customs and international trade remedies that
includes actively litigating antidumping duty, countervailing duty and safeguard cases for
over 25 years. He represents foreign companies in Canada, Europe, Asia, Latin America
and Mexico, as well as domestic producers, in industries that range from high-tech to
heavy industry, and from consumer to industrial goods. He can be reached at (202) 2305802 or at Douglas.Heffner@dbr.com.
Drinker Biddle’s Customs & Trade practice consists of five partners, two counsel,
associates, and trade professionals. Trade disputes and government regulation
increasingly affect companies involved in the global trade of goods and services. Our
team offers a full range of international customs and trade services, including trade
remedies and litigation concerning antidumping and countervailing duty investigations
and reviews, import counseling and compliance, export counseling and compliance,
and trade security. We possess the credentials, experience and track record that enable
our clients to maximize the opportunities, as well as minimize the risks, in the global
marketplace.
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Customs & Trade Alert
November 2010
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