US Customs and Border Protection (CBP) is leveraging the Enforce and Protect Act (EAPA) to target various industries based on a suspicion of evading anti-dumping/countervailing duties (AD/CVDs) by aggressively scrutinising imports potentially covered by an AD/CVD order.
On 4 March 2021 CBP announced that an EAPA investigation had been initiated with implementing measures against 15 importers suspected of evading AD/CVDs on quartz surface products (QSPs) from China via trans-shipment through Malaysia.
According to CBP, EAPA investigations are a "game changer", being "one of the most powerful and successful authorities in CBP's arsenal of tools". In 2020 alone, EAPA investigations recovered nearly $287 million in AD/CVDs owed to the government – a 500% increase since the EAPA programme began in 2017.
The recently announced EAPA investigation on QSPs from Malaysia names an unusually high number of importers as having evaded AD/CVDs on imports from China, continuing CBP's aggressive and evolving tactics through this enforcement tool. Based on this EAPA investigation, CBP is imposing various interim measures that will leave the dutiable status of QSPs from Malaysia uncertain and potentially exposed to the AD/CVD order on QSPs from China until CBP reaches a determination.
Under the EAPA, CBP can investigate whether companies have evaded AD/CVD orders through a multi-government party, on-the-record and public administrative proceeding, where the alleged violators can appeal CBP's determination through administrative and judicial reviews. Allegations of suspected evasion can be made by any interested party through CBP's public E-Allegations portal.
Through this enforcement tool, CBP has 90 days to determine whether reasonable suspicion exists under the allegation concerning the covered merchandise in order to implement interim measures to ensure collection of the correct duties owed to the government. This includes suspending liquidation, as in the case of EAPA investigations into QSPs from Malaysia, or even requiring importers to pay cash deposits for AD/CVDs on any future imports until the conclusion of the investigation.
Further, the EAPA permits CBP to:
- initiate EAPA investigations through allegations directly from the trade community, different government agencies or CBP itself, as detailed above;
- make adverse inferences when the alleged importers or foreign suppliers fail to cooperate with CBP's information requests;
- apply the aforementioned adverse inferences to third parties unnamed in the investigation; and
- investigate other entries of the covered merchandise at CBP's discretion.
As of 16 January 2021, CBP's Automated Commercial Environment will flag entries that are subject to EAPA investigations or court injunction actions. Presumably, this makes it easier for CBP to identify entries and collect cash deposits and suspend liquidation on goods covered by an EAPA investigation.
Since the EAPA was implemented, CBP has launched more than 131 investigations, which have conducted over 30 on-site verification visits to different foreign suppliers and identified more than $600 million in AD/CVDs owed to the government.
Aside from the recently announced investigation into QSPs from Malaysia, recent EAPA investigations have involved:
- xanthan gum, fresh garlic, steel trailer wheels, wire hangers, pipe and tube, wooden bedroom furniture, diamond sawblades, glycine, oil country tubular goods, hardwood plywood and aluminum extrusions; and
- imports from Cambodia, the Dominican Republic, India, Malaysia, Laos, Taiwan, Turkey, Thailand and Vietnam.
CBP is leveraging the EAPA to target various industries based on a suspicion of evading AD/CVDs by aggressively scrutinising imports potentially covered by an AD/CVD order. This robust tool permits CBP to request voluminous documentation from importers and their suppliers based on an allegation of suspected evasion from any interested party, requiring them to verify whether origin, classification, valuation and other claims to CBP were accurate. Failing to defend the accuracy of such entry claims will expose the importer to significant AD/CVDs, continuous or single-transaction bonds and potentially other penalties or enforcement actions from other agencies.
Companies that navigate in this space must ensure that the origin, classification and value claims on such imports are accurate and properly documented to defend against the increasingly high risk of CBP action through this enforcement mechanism. In effect, CBP treats EAPA investigations as a kind of strict liability where, if evasion is found, the importer must pay the AD/CVDs. Further, it provides CBP with broad latitude to test an importer's obligation to exercise reasonable care in these situations and penalise an importer for lack of compliance under this standard.
Planning for EAPA investigations can be extremely difficult as an importer may be under investigation and not know until CBP takes action or issues a CF-28. Importers must do significant due diligence on their supply chains to ensure that goods that may be included in a scope description are not trans-shipped to evade AD/CVD orders. It is thus critical that importers and suppliers of products with a nexus to AD/CVD orders review and document their entire supply chains to protect themselves from this high-risk exposure.
Angela Santos, partner, Antonio J Rivera, associate, and Leah Scarpelli, associate, assisted in the preparation of this article.
