United States: Key Takeaways From CBPs First Final Determination Of Evasion Under EAPA

Last Updated: September 29 2017
Article by Olga Torres

​On August 14, 2017, U.S. Customs and Border Protection ("CBP") issued its first notification of final determination of antidumping duties ("ADD") evasion pursuant to the Enforce and Protect Act ("EAPA").1 This case unofficially began nearly a year earlier when CBP received an allegation from M&B Metal Products Company, Inc. claiming that a U.S. importer,  Eastern Trading NY, Inc. ("Eastern Trading"), imported steel wire hangers manufactured in China and transshipped through Thailand to evade paying ADD.  CBP found that the allegations "reasonably suggested" evasion of ADD order A 570 918, and on October 11, 2016, CBP initiated its investigation into the matter.

Importantly, prior to providing Eastern Trading with any notice of initiation of an investigation, CBP issued a CBP Form 28 ("CF 28") requesting Eastern Trading to provide information regarding the origin of the merchandise, factory profiles, number of employees, production capacity, and equipment used in the production of the merchandise in Thailand. Eastern Trading promptly responded to the information request and sent pictures of the Thai manufacturing factory.

Takeaway No. 1:  At the time it received and answered the CF 28, Eastern Trading was not barred from submitting a Prior Disclosure. However, if in response to the information provided by Eastern Trading in the CF 28, CBP had issued a CBP Form 29 Notice of Action ("CF 29") alerting Eastern Trading of the initiation of an investigation of alleged violations of 19 U.S.C. § 1592, then Eastern Trading would be barred from submitting a Prior Disclosure.

Pursuant to its evasion investigation, CBP also conducted a site visit to the Everbright factory in Thailand, the facility that Eastern Trading claimed was manufacturing the steel wire hangers ultimately imported into the U.S. At the site visit, CBP found discrepancies between the information submitted in the CF 28 and the actual factory site. For example, CBP found that the factory site was very small, there were not enough employees, and there was not enough machinery to produce all of the wire hangers that had been shipped to the U.S.  Additionally, the pictures of the manufacturing factory sent by Eastern Trading to CBP did not match the visited facility. Further, the production numbers that Everbright's factory manager claimed the facility could produce in a day were not consistent with the number of hangers shipped to the U.S. CBP determined that even if the Everbright facility ran non-stop for 365 days, it could not produce the quantity of steel wire hangers that Eastern Trading had imported into the U.S.

These discrepancies between the information provided by Eastern Trading and the actual production capacity of Everbright's facility partially supported CBP's "reasonable suspicion" of evasion. In addition to the CF 28 discrepancies, there were other factors that led to CBP's reasonable suspicion of evasion. For example, during the course of its initial investigation, CBP discovered the existence of corporate links between Everbright, Eastern Trading, and Everbright's Chinese supplier.

Takeaway No. 2: Transactions between related parties may increase suspicion of coordination in order to evade ADD.

When a reasonable suspicion is present and within 90 days2 after the initiation of an investigation, CBP will issue "interim measures," which include: (1) suspension of liquidation of unliquidated entries of covered goods entered on or after the date of initiation, (2) extension of the period for liquidating unliquidated entries of covered goods that entered before the date of initiation, and (3) taking any additional measures necessary to protect the revenue of the United States.

Takeaway No. 3: CBP found "reasonable suspicion," instituted interim measures, and proceeded with the investigation due, in part, to inconsistences found in the CF 28 answers. Had the answers not been so inconsistent with the information gained from the manufacturing facility site visit in Thailand, the threshold of reasonable suspicion may not have been so easily met.

The reasonable suspicion of evasion led to the issuing on December 13, 2016 of a combined Notice of Initiation and Notice of Interim Measures. This was the date on which Eastern Trading was first put on notice that it was subject to the EAPA investigation process. These notices must be issued within five days of CBP's decision to take interim measures and no later than 95 days after the investigation is originally initiated.

Takeaway No. 4: An importer may be under CBP investigation for ADD/CVD evasion for up to three months before receiving any notice of the investigation from CBP.

After the imposition of interim measures, CBP continues the investigation and works toward making a final determination of evasion. CBP has until 300 days after the initiation of an investigation to either (1) make a final determination or (2) extend the investigation in cases that are "extraordinarily complicated."

To reach a final determination of evasion, CBP must determine that (1) the merchandise is subject to an ADD or CVD, (2) the merchandise entered the U.S. by the importer under investigation, and (3) the merchandise entered the U.S. by evasion.3 Evasion is defined as "the entry of covered merchandise into the customs territory of the United States for consumption by means of any document or electronically transmitted data or information, written or oral statement, or act that is material and false, or any omission that is material and that results in any cash deposit or other security or any amount of applicable ADD/CVD being reduced or not being applied with respect to the merchandise."4

Before a final determination of evasion was reached, CBP issued a second CF 28 to Eastern Trading and a "Claimed Manufacturer Request for Information" to Everbright. Neither company answered within the time limits for a response. However, CBP coordinated with and received prompt cooperation from Thai and Chinese government officials regarding Everbright's imports of finished Chinese products into Thailand and Everbright's Chinese supplier's exports directly into the U.S.

Takeaway No. 5: CBP will coordinate with foreign government authorities to obtain information in furtherance of an EAPA investigation.

On August 14, 2017, the Trade Remedy Law Enforcement Directorate ("TRLED") delivered the notification of final determination of evasion to Eastern Trading. CBP determined that there was substantial evidence that Eastern Trading entered steel wire hangers covered by an ADD order into the customs territory of the U.S. through evasion.

As a result of CBP's final determination, CBP will continue to suspend the liquidation for any entry that entered on or after October 11, 2016, the day the investigation was initiated. CBP also requested that Eastern Trading post cash deposits of 187.25% on its entries of steel wire hangers, and on any future imports of covered hangers. Eastern Trading will have to post these cash deposits prior to the release of the imported goods. Interestingly, Eastern Trading has argued that its Chinese supplier's lower separate ADD rate (40.99%) should apply instead of the higher countrywide rate of 187.25% for "all others." CBP responded that Eastern Trading never claimed its wire hangers were sourced from a Chinese supplier with the lower ADD rate.

Takeaway No. 6: An importer claiming imports from a country not subject to ADD will likely not receive the benefit of the lower ADD rate of a particular supplier in an ADD-subject country after CBP makes a final determination of evasion. Rather, the importer will be required to pay the higher countrywide ADD rate.

Conclusion

As the first finding of evasion under the EAPA, the Eastern Trading investigation and final determination provide multiple takeaways from which importers may learn regarding the investigation process and how to best prepare for an investigation. The deadlines provided for evasion investigations can be complex and easily missed or misunderstood. If you or your company would like further explanation of anti-dumping/countervailing duty orders or the regulations controlling the initiation and evasion investigation, please do not hesitate to contact us.

Footnotes

1 On August 22, 2016, the U.S. Customs and Border Protection ("CBP") published an interim final rule pursuant to the Enforce and Protect Act of 2015 ("EAPA"). The EAPA is contained in the Trade Facilitation and Trade Enforcement Act of 2015 ("TFTEA") and it established a formal process for CBP to investigate allegations of ADD/CVD evasion. We have written more extensively about the interim final rule here.

2 For a better understanding of the EAPA investigation process and its deadlines, please see the CBP-created timeline, available at https://www.cbp.gov/sites/default/files/assets/documents/2017-Apr/EAPA%20Investigation%20Process%20Overview_FINAL%20%28002%29.PDF (last visited, Sept. 11, 2017). 

3 U.S. Customs and Border Protection, Public Version: Notice of Final determination as to Evasion, EAPA Case Number: 15135/7175, August 14, 2017.

4 19 C.F.R. § 165.1

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Olga Torres
Events from this Firm
25 Sep 2018, Conference, Dallas, United States

Location:

Liuna Station
360 James St., N, Hamilton
Toronto, Canada

Olga Torres will speak on the latest in U.S. trade law developments. For the full agenda, click HERE.

 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions