Comment: Understanding Circumvention of Antidumping Duties

News & Insights
May 8, 2013

plea agreement filed in a federal court in the Northern District of Illinois on May 3 described an intricate scheme that evaded the payment of nearly $39 million in duties on imports of honey from China.  In the agreement, Hung Yi Lin a/k/a Katy Lin admits to using the freight forwarding company Ms. Lin owned and operated, KBB Express Inc., to transport Chinese-origin honey to the U.S. market without paying antidumping duties or honey assessment fees.

Two aspects of the facts presented in the plea agreement are of particular importance.  First, in order to evade the payment of duties and fees, Ms. Lin facilitated the entry of up to 764 shipping containers of Chinese-origin honey valued at roughly $11.5 million as “sugars, syrups and apple juice concentrate” rather than honey.  Second, these shipments were entered through the use of twelve (12) different importers of record “controlled by Chinese honey producers and manufacturers,” for which Ms. Lin acted as the U.S. agent.

While some have argued that a switch from a retrospective system to prospective system of assessing antidumping duties would prevent circumvention, Ms. Lin’s plea agreement demonstrates that the type of assessment system in place does not affect this type of circumvention.  In this scheme, imports were misclassified upon entry to entirely evade the discipline of an antidumping duty order.  Regardless of whether antidumping duties were assessed upon entry or at some future point, misclassification schemes frustrate the payment of all duties and fees.  Indeed, the scheme described in the plea agreement evaded the payment of retrospectively assessed antidumping duties and the established one cent per pound honey assessment fee collected by U.S. Customs and Border Protection upon entry. Further, the plea agreement demonstrates the limitations inherent in any administrative proceedings designed to address circumvention of antidumping duty relief.  Ms. Lin was the U.S. agent for at least twelve different importers:  Bright Step (United States) Limited; Sweet Campo Co. , Ltd.; Migrow Trading Inc.; Chix Trading Inc.; Rouka International Inc.; Oliv Amber Trading Co., Ltd.; Titto International Inc.; Stariver Trading Inc.; Tobest Trading Co., Ltd.; Russa International Inc.; Sunny (USA) Trading Inc.; and Silver Spoon International Inc.  In these circumstances, an administrative anti-circumvention action against the imports of, say, Oliv Amber Trading would have been effectively useless.  Oliv Trading could easily close down operations in response to the proceeding and imports would continue under any of the other eleven importers.  Even if all twelve related importers were identified and separate administrative anti-circumvention actions were brought against each, the creation of a dozen paper importers is an indicator of how easy it is to establish shell companies that make circumvention possible.

In evaluating proposed solutions to the massive and growing problem of circumvention of antidumping duties, the scheme outlined in Ms. Lin’s plea agreement must be addressed.  Any proposed solution should offer a direct response to intentional misclassification and the use of shell companies.  Absent such features, the use of shell company importers in evasion schemes will continue to grow, further undermining the integrity of our trade laws.