While the results of CBP’s informal investigations of evasion of duties were not made public, CBP’s website now includes an EAPA page with links to “Notices of Action” and “Notices of Determination”: cbp.gov/trade/trade-enforcement/tftea/enforce-and-protect-act-eapa. This listing implies that the agency intends to provide the trade community with its determination as to whether to launch a formal EAPA investigation and, once an investigation has been initiated, its determination as to whether evasion is occurring.
CBP will initiate an EAPA investigation if it determines that the allegation “reasonably suggests that the covered merchandise has been entered…through evasion.” Evasion is defined as a consumption entry supported by a material and false statement or act, or omission of material fact, that results in a reduction in duties (or complete avoidance of applicable duties).
M&B Metal Products Co., Inc. has produced metal hangers in the United States since 1943. It alleged that Eastern Trading NY, Inc. was evading antidumping duties on steel wire garment hangers from China by transshipping through Everbright Clothes Hanger (Thailand) Co., Ltd. The allegation contended that Everbright’s Thailand facility “was incapable of manufacturing the volume of hangers imported by Eastern Trading.” It supported the allegation with a report from a researcher who made three visits to the Thailand site, but “did not see any warehouse facility, office, or trucks.” Moreover, the researcher spoke to “an accounting firm for Everbright and was informed that the Thailand factory was still under construction.” In addition, Everbright’s financial statements noted that it sells, imports and exports hangers, but did not mention manufacturing them. Available import data indicated that Eastern Trading imported more than 88 million hangers from Everbright from August 2015 to July 2016. To establish transshipment, M&B alleged that Everbright’s owners were based in China, that no production was done in Thailand, and that orders for hangers must be placed in China. M&B also established a web of corporate relationships which implied that Everbright was established for the purpose of transshipping Chinese hangers.
Based on the evidence submitted, CBP initiated a formal investigation and requested information from Eastern Trading, “including full production records, a factory profile, the number of employees, production capacity, and equipment used” as well as “photographs of the manufacturing equipment and export documentation.” EAPA Case Number 15135 (Notice dated December 13, 2016) cbp.gov/document/report/eapa-case-number-15135-eastern-trading-ny-inc-notice-initiation-inv-and-interim.
Based on this evidence and other information adduced during the investigation, CBP found that there was a “reasonable suspicion” that the importer entered merchandise into the United States through evasion. CBP took “interim measures” and adjusted the entries subject to investigation to reflect that they were subject to the antidumping duty order on steel wire garment hangers from China. Thus, antidumping duty cash deposits were owed. Moreover, all future imports for Eastern Trading are subject to “live entry” requirements, meaning that all entry documents and duties are required to be provided prior to release of the entered merchandise.
In comments submitted to CBP in December regarding the agency’s EAPA regulations, the Southern Shrimp Alliance, a domestic industry group, observed that information from bills of lading indicated that other companies, now dissolved, had previously acted as importers on shipments of Thai-origin wire hangers from Everbright before Eastern Trading NY’s involvement. The Southern Shrimp Alliance noted that the phone number listed for all three importing companies in the bills of lading had been the same and that the fact pattern described by CBP underscored the importance of adopting regulations that would prevent parties from evading duties through the use of shell company importers.
In contrast to the wire hangers case, CBP decided not to initiate an evasion investigation with respect to an allegation by Wheatland Tube Company involving circular welded carbon quality steel pipe from China. CBP explained that the allegation sufficiently established that welded pipe was being imported, but failed to adequately support the evasion allegation. Where M&B had engaged a researcher to document concerns regarding Everbright’s shipments of wire hangers to Eastern Trading NY, Wheatland’s allegation was based on value data that was not specific to the importer (NEXTracker). Moreover, Wheatland provided “no evidence, beyond its mere supposition, to reasonably suggest that NEXTracker’s entries were made by a material false statement or act, or material omission” that resulted in antidumping duty reductions or avoidance. CBP stated that – “Evidence of importation, without more, is not sufficient to raise a reasonable suspicion of evasion.” EAPA Case Number 15134 (Notice dated October 17, 2016) cbp.gov/document/report/eapa-case-number-15434-nextracker-notice-non-initiation-inv-oct-17-2016.