Doing Whatever We Want: How the Inability to Collect AD/CVDs on Chinese Imports Led to Broad Tariff Increases

News & Insights
Nov 7, 2024

On November 5th, the Maryland Journal of International Law published Doing Whatever We Want: The Future of the Rules-Based Trading System in a Multipolar World by Picard Kentz & Rowe’s Nathaniel Maandig Rickard.

In the article, Rickard argues that the inability to impose and collect antidumping (“AD”) and countervailing (“CVD”) duties on Chinese imports contributed to the United States turning away from strict conformity with a multi-lateral rules-based trading system in favor of unilateral action to address concerns regarding import competition.  The piece additionally asserts that this development will likely lead to the increased use by the United States government of country-of-origin specific trade regulation in the future.

Although frequently criticized for creating uncertainty for U.S. importers, the retrospective system of assessment of AD/CVDs administered by the federal government, as a practical matter, rarely results in additional duties becoming due after import entry.  In fact, in 2016 when the U.S. Government Accountability Office (“GAO”) last reviewed data from U.S. Customs and Border Protection (“CBP”) for import entries made between fiscal years 2001 and 2014, the government watchdog found that the ultimate amount of AD/CVDs assessed was equal to AD/CVD amounts deposited at the time of import entry sixty-three percent (63%) of the time and that the importer received refunds of some or all of the AD/CVD amounts deposited nineteen percent (19%) of the time.  In contrast, additional AD/CVD amounts were assessed with respect to just eighteen percent (18%) of import entries.  In other words, for more than four out of every five import entries subject to AD/CVDs, amounts deposited at the time of entry were more than sufficient to cover any sums due to the U.S. Treasury.

However, where additional amounts of AD/CVDs have been owed by importers post-importation, CBP’s ability to collect the debt has been limited.  Collection problems have been particularly acute with regard to Chinese-origin imports and have fueled further dissatisfaction with that country’s role as a major trading partner of the United States. 

As the share of total U.S. import value doubled for China since 2000, concerns regarding the adverse effects of Chinese imports have grown.  While China accounted for roughly sixteen percent (16%) of the total value of U.S. commodity imports in 2022, Chinese-origin goods are the subject of over one-third (35%) of the AD/CVD orders administered by the federal government.  Yet, Chinese-origin goods account for a much more substantial portion of uncollected AD/CVDs.  Between fiscal years 2001 and 2020, CBP reported being unable to collect $4.16 billion in AD/CVDs owed to the U.S. Treasury.  Of that amount, roughly $3.54 billion – or eighty-five percent (85%) – related to goods imported from China.  In the context of CBP’s overall collection activities, while the agency reports being able to collect ninety-nine percent (99%) of standard customs duties imposed on imports, CBP has only been able to collect approximately twenty-six percent (26%) of AD/CVD amounts assessed post-importation. 

As federal agencies have looked to improve collections of AD/CVDs, the government has found that the bulk of these import transactions are intentionally structured to evade the payment of amounts due.  One U.S. Department of Treasury official testified to Congress that AD/CVD collection problems “have been exacerbated in some cases by unscrupulous importers who imported knowing they were likely to incur duties not fully secured by bonds or cash deposits following retrospective duty assessment and who then absconded when payment was due.”  Because the United States allows foreign persons and companies to act as importers of record (“non-resident importers”), some of these importations were structured so that China-based entities would be responsible for any further duty amounts owed.  Collections of additional AD/CVDs in these circumstances has proved impossible.

The imposition of additional tariffs on a wide-variety of Chinese-origin goods by President Trump under Section 301 authority in 2018 provided an alternative approach to dealing with these imports.  As of the end of fiscal year 2024, the United States has collected $235.3 billion in Section 301 duties assessed on Chinese imports.  While the imposition of these duties caused the total import value of Chinese-origin goods into the United States to initially fall from $543 billion in 2018 to $453 billion in 2019, by 2022, the total value of U.S. imports of goods from China had rebounded to $526 billion.  Nevertheless, despite the continued significant presence of Chinese-origin goods in the U.S. market, enforcement of the Section 301 duties on Chinese imports has corresponded to a decline in efforts to obtain new AD/CVD relief on Chinese goods.  Specifically, from fiscal year 2015 though fiscal year 2018, AD/CVD petitions filed against Chinese-origin goods accounted for thirty percent of all such petitions filed (77 out of 259).  However, between fiscal years 2019 and 2024, the share of petitions filed against Chinese-origin goods dropped by a third to just twenty percent of the total AD/CVD petitions filed (81 out of 415).

With these facts in mind, Doing Whatever We Want argues that Chinese efforts to circumvent the United States’ AD/CVD laws underscores the limitations of these trade remedy laws: “By simply declining to adhere to the trade remedies imposed by the U.S. government and continuing to ship merchandise to this market with regard for the tariffs owed, Chinese suppliers exposed weaknesses in the rules-based trading system that are likely to be subject to greater abuse in an increasingly multipolar world.”  This has left the United States, and other major importing markets, with little choice but to explore other approaches: “In light of the poor enforcement of AD/CVDs with regard to Chinese-origin goods, the Section 301 trade action has demonstrated that China’s flouting of the rules-based trading system has consequences.  Through its failure to address repetitive, massive, and documented evasion of AD/CVDs imposed in the United States, the Chinese government has incentivized its trading partners to explore options to remedy injurious trade outside of those expressly contemplated by the WTO agreements.  Pervasive non-compliance has further underscored the importance of flexible approaches to address particular state actors distinct and apart from others.”