Source: http://itctradelaw.com/articles/AD-evasion.html
Timestamp: 2019-04-26 16:39:07+00:00

Document:
Ireland, and indeed the whole of the British Isles, are indeed famous for rainy or damp weather—think of the famous Irish description of a drizzling as a “soft day.” But, as is the case of all proverbs, the saying is entirely based on a strong factual predicate, grounded in experience, and not simply an amusing fancy, and generally needs no further explanation.
We cannot be too “cute,” to use another Irish turn of phrase, here—the title has already given it away. So, let’s get right to it—the administration of the antidumping or countervailing duty law would not count for anything at all if imports that should be subject to additional duties pursuant to an Antidumping Duty Order or Countervailing Duty Order1 (your umbrella) were allowed to escape the imposition of those duties due to fraud in the customs entry process (your shoes are leaking). You would still be suffering from unfair competition even if there was an Order in place (you’d still be wet and miserable even if you are wielding an umbrella). Congress listened to all of those domestic companies sloshing around with sodden shoes. We are reporting recent developments to keep those feet dry.
So how does this anti-evasion program work? It all starts with the opening of an investigation by Customs and Border Protection (CBP). In fact, the statute works at one of those points where the trade laws and the customs laws come together.
As for the investigation processes, the law and regulations provide for the consolidation of allegations and referrals and the ensuing investigations.13 This is not surprising since it can be expected that at least some of the foreign producers and the importers of goods covered by an Order can make common cause and search for and arrive at a “work around” solution. Nor is it surprising that the law has real “teeth” for those parties who elect not to cooperate to the best of their ability. As is the case with the antidumping and countervailing duty laws themselves,14 such a party faces an “adverse inference” determination by the agency.15 That means that CBP will use the information provided in the allegation, determinations by CBP in another investigation or any other available information.
There have been several past and current investigations into evasion of Antidumping Orders opened by CBP after allegations were received from domestic interests. One such investigation was into charges of transshipments of Chinese diamond sawblades through Thailand and another was concerned with wooden bedroom furniture from China. Another dealt with eight charges of transshipments of Chinese wire coat hangers via Malaysia.21 These investigations were consolidated and we cite from the Notice of Investigation to provide some insight into this regime in practice.
There is one remaining US producer of these wire coat hangers and that company filed the allegations with CBP on April 16, 2017. CBP acknowledged receipt of the allegations and the investigations were duly opened on May 12, 2017. The AD Order on Chinese wire hangers has been in place since 2008.22 In the interim, import volumes of wire hangers from Malaysia soared by 3,000 percent from32013 to 2014 and doubled again from 2104-2015. At the same time, wire hanger imports from China decreased by 1000 percent.
If course, if the production of wire hangers was fully shifted from China to Malaysia, then that would not make for a case of evasion, as the wire hangers would be of Malaysian and not of Chinese origin. But if the wire hangers were still produced in China and then merely transited Malaysia, their status as being within the scope of the AD Order would remain intact. Any subsequent importation into the US claiming falsely a Malaysian origin for the transshipped goods would make for a case of evasion.
As part of its efforts, CBP made use of on-site visits, as in the days of its “jump teams,” who had been used to investigate transshipments during the hay days of the textile and apparel quota regime in the 1990s and early 2000s.
Foreign market research and physical inspection of the facilities of a small group of Malaysian manufacturers that were claimed to be the manufacturing locations revealed vacant lots, non-existent addresses, or activity that had nothing to do with wire coat hanger production (e.g., plastic household goods, radiator repair shop, rubber and latex glove making). In short, the on-site visits revealed no wire hanger production at any of the addresses.
Detailed importer responses to CF28 Requests for Information from 5 of the 8 importers (3 did not respond) purported to show a wealth of data, complete with photos in the case of 4 companies, about physical facilities, personnel, production plant and equipment, production records, electricity bills. Apparently all of this information was bogus.
Electricity bills that purported to support production by the putative companies were shown to be false. The corporate ownerships revealed patterns of ownership between the Chinese owners of Chinese factories.
Financial records and filings with the Malaysian government showed little or no activity by the companies. Two of the companies had filed documents with the Malaysian government that they were dormant, had never commenced business operations and had never engaged in foreign currency transactions. They reported identical assets—cash on hand of the equivalent of US$0.45. Yet these two companies had supposedly exported, on a combined basis, 335 shipments in 2015 and a further 89 shipments in the first quarter of 2016.
There was a link between one of the importers and a Chinese company that had been found in an earlier investigation to have evaded duties by transshipping via Thailand.
One of the importers had a non-existent address in the U.S.
My reaction: wait for the civil and criminal penalty cases!
There has been much criticism about the onerous nature of the trade remedy regime. And we can be sympathetic to some or indeed many importer complaints about that administrative process. But there can be no denying that there has been evasion of trade remedy Orders. The EAPA will prove to be an effective means of thwarting those illicit endeavors.
1. Issued under 19 USC § 1763e or 19 USC § 1671e, respectively.
2. Neville, “Trade Facilitation and Trade Enforcement Act of 2015,”27 JOIT No. 5 at 22 (May, 2016).
3. Pub. L. 114-125, Act of Feb. 24, 2016.
4. The title is referred to as the “Enforce And Protect Act” (EAPA).
5. 19 USC § 1517 (a) (3), with the regulations contained at 19 CFR §§ 165.1et seq.
6. 19 USC § 1517 (a) (5) (A).
7. 19 USC § 1517 (a) (5) (B) (i). In the face of clerical error, covered merchandise that was entered without payment of duty due to clerical error will still be amenable to the payment of any duties that are applicable. 19 USC § 1517 (a) (5) (B) (iv).
8. 19 USC § 1517 (a) (5) (B) (ii).
9. 19 USC §§ 1517 (b) (2) and (3).
10. 19 USC 1517 § (b) (7).
11. Now classed as a Directorate, the office was established pursuant to Section 411 of the EAPA, codified at 19 USC § 4371.
12. 19 USC § 1516a (2) (vi) by virtue of 19 USC § 1517 (b) (4) (D).
13. 19 USC § 1517 (b) (5), 19 CFR § 165.13 (b).
14. 19 USC § 1677e (b), 19 CFR § 351.308.
15. 19 USC § 1517 (c) (3), 19 CFR § 165.6.
16. 19 USC § 1517 (c) (1). In the case of extraordinary complications, this can be extended for a further 60 calendar days. Subsection (c) (2).
17. 19 USC § 1517 (d).
18. 19 USC § 1517 (e).
19. 19 USC § 1517 (f), 19 CFR §§ 165.41-.47.
20. 19 USC § 1517 (g).
21. Notice of Initiation of Investigation and Interim Measures Taken as to Certain Importers of Wire Hangers from Malaysia Concerning Evasion of the Antidumping Order on Garment Hangers from the People’s Republic of China, Consol. Case No. 7191 (August 1, 2017) available at https://www.cbp.gov/newsroom/national-media-release/us-customs-and-border-protection-exercises-eapa-authority-launches. An earlier investigation had found transshipment of wire coat hangers through Thailand.
22. Notice, 73 Fed. Reg. 58111 (Oct. 6, 2008).

References: § 1763
 § 1671
 § 1517
 § 1517
 § 1517
 § 1517
 § 1517
 § 4371
 § 1516
 § 1517
 § 1517
 § 165
 § 1677
 § 351
 § 1517
 § 165
 § 1517
 § 1517
 § 1517
 § 1517
 § 1517