China

Don't Get Crushed When You Import

How can you, as an importer of products, avoid getting hit with a massive antidumping or countervailing duty fee?

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US china flagsEd. note: This post was written with the assistance of Harris Moure’s lead trade lawyer, Bill Perry.

The U.S. Importer of Record is liable for antidumping and countervailing duties tied to the product being imported. The Importer of Record is the company listed in Block 26 of the U.S. Customs 7501 form.

Under U.S. antidumping, countervailing duty, and customs laws, the Importer of Record must exercise reasonable care in importing products and in filling out Customs forms. The Importer of Record must correctly state a product’s country of origin and also whether antidumping (AD) and countervailing duties (CVD) apply to the imported product. A knowingly false statement on a Customs form constitutes criminal fraud.

If AD or CVD rates go up in a subsequent review investigation, the Importer of Record is retroactively liable for the difference, plus interest. Retroactive liability for AD and CVD cases is a particular problem involving goods imported from China, because the U.S. Commerce Department treats China as a non-market economy country. Dumping is generally defined as selling products in the United States below their normal value, which generally means selling a product in the United States below its price in the home market or below its fully allocated cost of production.

Since China is a non-market economy country, the Commerce Department refuses to use actual China prices and costs to determine whether a Chinese company is dumping. It instead uses complicated consumption factors for raw materials and other inputs and surrogate values from five to ten constantly changing countries to calculate the Chinese company’s production costs. All this makes it impossible for the Chinese manufacturer/exporter to know whether it is dumping, never mind the U.S. importer.

In the mushrooms from China antidumping case, from the time the antidumping order issued in 1999 through numerous subsequent yearly review investigations, many antidumping rates were in the single digits because the Commerce Department used India as the surrogate country. But when the Commerce Department switched from India to Columbia(!!!???) as the surrogate country in 2012, the antidumping rates went from less than 10% to more than 200%. The Importers of Record were then liable for the difference in the duty rates, plus interest.

How can you, as an importer of products, avoid getting hit with a massive antidumping or countervailing duty fee? Do not become the Importer of Record. The dollars saved by this can be staggering.

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What if your company is the Importer of Record and your antidumping or countervailing rates go up? U.S. antidumping and countervailing duty laws are remedial, not penal. This means requesting review investigations at the Commerce Department, appealing adverse rulings to the courts, and working with Customs often can substantially reduce or even eliminate any penalties. Chinese exporters also can (and often do) use the Commerce Department review process to reduce their antidumping and countervailing duty rates so they can export to the U.S. again.

Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Portland, San Francisco, Barcelona, and Beijing. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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