By Colin Milner and Patrick O’Connor
Antidumping (AD) and Countervailing duty (CVD) orders serve as a vital tool for U.S. domestic industries to ensure a fair market by levying import duties on unfairly traded merchandise. Newly released U.S. Customs and Border Protection (CBP) reports indicate that cases brought by Picard Kentz & Rowe LLP (PKR) represent approximately 47 percent of AD/CVD duty deposits collected in FY2018 and approximately 46 percent of AD/CVD duty deposits collected in FY2019.
U.S. industries seeking the relief of an AD or CVD order must establish that the domestic industry is materially injured (or threatened by material harm) from unfairly traded imports before the U.S. International Trade Commission (ITC). Additionally, in AD investigations, U.S. industries must demonstrate to the Department of Commerce (DOC) that foreign exporters sell their merchandise at less than fair value or in CVD investigations, demonstrate that foreign governments’ subsidies provide an unfair competitive advantage in export markets. An ‘order’ is established when both the ITC finds material injury and the DOC finds that subject merchandise is dumped or that an industry is unfairly subsidized.
Once an AD or CVD order is in place, CBP collects estimated duties on entries of subject merchandise at the rate calculated by the DOC. This adjustment ensures a level playing field for U.S. producers by increasing the price of a dumped or subsidized product to reflect a true market value of that product. The DOC conducts administrative reviews of AD/CVD orders on a yearly basis and calculates new rates for the companies that participate in the review. At the conclusion of a review, the DOC revises the rates collected at the time of entry and instructs CBP to collect additional duties owed by the importer or refund any overpayment of estimated duties to the importer.
The last five years have been an especially lively time in the AD/CVD space, with the number of active orders ballooning from 318 in FY2015 to 540 by the end of FY2020, reflecting an increase of 70% in AD/CVD orders over a five year period. This pace shows few signs of abetting, as the number of active investigations before the DOC, or having recently been filed, is even higher in the first quarter of 2021 than it has been in recent years.
Active orders have resulted in billions of dollars in duties collected by CBP. In FY2018 and FY2019, the most recent years for which detailed reporting has been published, estimated duties collected on merchandise subject to AD/CVD orders amounted to $2.3 billion and $1.9 billion respectively. The effectiveness of AD/CVD orders is impacted significantly by the capacity CBP has to compel importers to pay estimated duties owed at the time of entry. Challenges faced by the CBP in capturing estimated duty payments at the border include, but are not limited to, misclassification (importing subject goods under improper tariff codes or identifying merchandise as not subject to an AD/CVD order), transshipment (importing subject merchandise produced in a country listed under an active AD/CVD order through a country either not listed or with a lower duty rate), funneling (falsely claiming that subject merchandise originated from an exporter with a lower estimated deposit rate than its competitors), and manipulation of the DOC’s new shipper and administrative review processes, through which exporters obtain low estimated duty rates, import massive amounts of subject merchandise at low prices and disappear when final AD/CVD rates are determined. Bringing about an AD/CVD order has minimal market impact (and minimal benefit for the domestic industry) if CBP is not able to collect appropriate duties on subject imports.
PKR has always taken an active role in ensuring that our clients not only succeed in their attempts to receive protections against unfair trade practices through AD/CVD orders, but also in seeing that those orders are implemented effectively. PKR’s approach is evident in the most recent reporting from CBP on duty collections in FYs 2018 & 2019. Despite a delay in detailed reporting from CBP, the agency’s reporting demonstrates that PKR’s clients see significant impacts at the border, including nearly $2 billion in deposited duties in just those two years. This includes subject imports of softwood lumber from Canada, refillable stainless steel kegs from China and Mexico, and frozen warmwater shrimp from India, Vietnam, Thailand, and China.
The most striking example of the impact of AD/CVD orders for PKR’s clients has been in the area of softwood lumber imports from Canada. In FY2018, softwood lumber importers in the U.S. paid combined estimated AD/CVD duties of over $1 billion. In the same year, CBP collected a total of $2.3 billion in AD/CVD duties on all orders. Softwood lumber duties were the single largest set of AD/CVD orders administered by CBP during this period, and softwood lumber from Canada alone accounted for approximately 45% of all AD/CVD duties collected in FY2018.
In FY2019, the numbers are similar, with softwood lumber from Canada accounting for combined estimated AD/CVD duties of $0.9 billion out of a collected total of approximately $1.9 billion for all active orders. This meant that softwood lumber imports from Canada alone accounted for approximately 46% of all AD/CVD duties collected in FY2019.
While softwood lumber from Canada is the largest single case for AD/CVD duties currently in effect, it is by no means the only trade litigation case successfully managed by PKR’s trade team. Under the AD order on frozen warmwater shrimp imports from India, Thailand, and Vietnam, estimated AD duties collected in FYs 2018 & 2019 were $36.1 million and $37.2 million respectively. Additionally, the AD/CVD order on refillable stainless steel keg imports saw over $600,000 in duties paid in FY2019. Each of these orders evidences a significant impact at the border.
By combining our team’s wealth of knowledge with the boutique shop experience, PKR is able to deliver meaningful results and value to its clients seeking to utilize U.S. trade remedy laws to combat unfair trade practices and establish a level playing field in the U.S. marketplace.