What is Antidumping and Countervailing Duty and Why Do They Matter?
Staff | M.E. Dey & Co.
Importing product subject to Antidumping or Countervailing Duty (AD/CVD) Orders carries significant risk to the importer. As the importer is solely responsible for compliance and payment of all subject AD/CVD duties, it is critical to understand what products are included in the various AD/CVD orders, and to ensure that the applicable estimated and final duties are deposited for all entries of subject merchandise.
So, what is Antidumping and Countervailing Duty? Antidumping (AD) duties are assessed when it is determined that foreign suppliers or manufacturers are selling goods in the U.S. below the price it is sold in the exporter’s market. Countervailing (CV) duties are assessed when it has been determined that a foreign government provided subsidies to the foreign supplier or manufacture to assist in the exporting and selling of their goods in the U.S. The World Trade Organization (WTO) rules allow governments to issue AD or CV Duty Orders when the domestic industry is able to demonstrate that imported product is dumped or subsidized and that it causes material injury to the domestic industry.
Imported goods that are described in the scope of an AD/CVD order are subject to additional duties as determined by the AD/CVD analysis. The rate of duty set for AD/CVD orders can change as the investigation progresses through the Preliminary and Final Determination phases. The International Trade Commission (ITC) and the Department of Commerce (DOC) investigate the AD/CVD complaints filed by domestic industries. If it is determined, in the preliminary phase, that injury is likely, and that dumping or subsidies exist, an ESTIMATED rate of duty is determined. Importers are required to deposit the additional AD/CVD duties on all entries of merchandise subject to the AD/CVD order. CBP will suspend liquidations, or hold entries open, until the final rate is determined.
Unfortunately, the estimated duties deposited at the time of entry are not final. AD/CVD cases are very complicated, time-intensive proceedings that may result in a denial of the complaint, or if found to be valid, will move from Preliminary to the Final Determination of injury phase. If at the Final Determination phase, it is determined that dumping and/or subsidies exist, and there is material injury to the domestic industry, the DOC will set a retroactive final determination duty rate that may increase or decrease from the preliminary rate. If the duty rate increased, Importers are required to deposit the additional duty with interest. If the rate decreases, the Importer will be refunded the difference in duty plus interest.
However, we are not necessarily done yet. Annually, on the anniversary month of the AD/CVD order, foreign produces, exporters, importers and domestic industries are given the opportunity to request an Administrative Review of the determination and of assessed duty. If a review is requested, the DOC reviews the previous 12 months of entries of AD/CVD subject goods. This process can take 12 to 18 months to complete. Based on the review, the DOC will calculate final AD/CVD liability on the subject entries. The final rate that may be higher or lower than the previously deposited duty. At that time, the importer will be required to deposit any applicable additional duties with interest, or will be refunded the difference in duty with interest. The entry will be liquidated, or closed, and no further duties will apply. If no requests were received, entries are liquidated at the rate set at the Final Determination.
So, what do Importers need to do? The AD/CVD review process can take three or more years to determine final duty liability. As such, this process subjects importers to uncertainty in duty liability risks. To avoid potential financial consequences and supply chain disruptions, Importers must do their due diligence. Importers must know and understand when product is within the scope of an AD and/or a CV order. Importers must review AD/CVD investigations from initiation through the final determination of duties and regularly review product categories to determine if imported goods are described in the scope of an order. AD/CVD scope information is available on the DOC, International Trade Administration website.
Importers are required by law to pay duties, taxes and fees owed on imports into the United States, including AD/CVD duties. Importers must not engage in any efforts to evade AD/CVD orders by intentionally declaring an incorrect country, product classification, artificially reduced product value, or any other means of circumventing AD/CVD duty liability. Accepting reimbursement of AD/CVD duties, by the foreign manufacturer or the seller, is illegal and will result in a DOUBLING of the assessed AD/CVD duties. Importers must submit a Non-Reimbursement statement, with each entry of subject AD/CVD merchandise, to certify that AD/CV duties have not been reimbursed by the foreign manufacturer.
It is critical to work with and keep your Import Broker informed of any products subject to an AD/CVD Order to ensure the AD/CVD order is declared and that the required duty is deposited. The importer has the ultimate liability for declaring and depositing the estimated duty at the time of entry, and any additional duties when the final rate is set. Failure to identify imports subject to AD/CVD duties, and/or failure to pay AD/CVD duties, is a violation of U.S. law. The federal government can impose significant monetary penalties and/or seize the merchandise and can impose civil and criminal penalties including imprisonment of up to five years for each offense.
For more information on Antidumping and Countervailing Duty Orders, see our Antidumping and Countervailing Whitepaper. Additionally, review CBP’s AD/CVD Frequently Asked Questions.