Bond Spotlight - ADD/CVD Reform Could Be Coming Soon
Around the world, securing antidumping and/or countervailing duties (ADD/CVD) is a relatively painless process. This is because importers pay a fixed amount of duties at the time of entry and book their profits accordingly. The U.S. is the only country where the ADD/CVD process operates as a “retrospective” system. The final amounts owed for these retrospective duties remain unknown until annual administrative reviews are fully completed. This laborious and lengthy process can—and often does—take anywhere from 3-5 years to complete.
This of course means that by the time entries finally liquidate, “adjusted” ADD/CVD rates can—and too often do—increase significantly. Many importers encounter significant difficulty paying unanticipated duty increases, mainly because their goods have already been sold. In addition, a significant number of bad industry actors use shell companies or “straw man” importers to take advantage of the historically long delays. All told, the U.S. loses millions in uncollected ADD/CVD duties every year. Simply stated, this is an industry-wide problem that must be addressed.
To that end, the Customs Commercial Operations Advisory Committee (COAC) advisory group is currently recommending the U.S. industry to seriously reconsider shifting from a retrospective to a prospective system as part of an overall industry effort to upgrade and modernize U.S. custom’s processes, as well as to much more accurately assess antidumping and countervailing duties.
IB&M is on board with this necessary shift. Having successfully worked with CBP & customs brokers nationwide for over 3decades using our industry experience to facilitate the proper placement of complex bonds and working with importers to secure vital collateral, IB&M is ideally situated to support this key procedural shift. We fully support ADD/CVD reform which we trust will bring real and necessary relief to an untenable situation.
At present, reputable importers are regularly penalized for the disreputable and deliberately malicious behavior of “bad industry apples”. These bad apples take damaging advantage of the holes in our current system. Not knowing what financial burden these importers will be faced with 3-5 years down the line makes bonding the risk very difficult without some form of security. The good news is that this system is correctible. At the very least in a proactive system, Sureties can analyze exposure based on current financials at the time of entry and Customs Brokers are far less likely to be named in a lawsuit resulting in an a costly E&O insurance claim.
The COAC’s recommendation to switch to a proactive duty assessment will allow all brokers and importers to more accurately, properly and profitably forecast ADD/CVD duties, and in doing so relieve a significant amount of unnecessary industry pressure which can potentially cause catastrophic future outcomes. Proper oversight can and will close dangerous loopholes and prevent unnecessary errors which cause industry-wide damage. We feel in the end, reform to this process will not only ease the burden on importers, brokers, and sureties, but will ultimately make collecting AD/CV duties much more efficient for CBP.
The COAC’s recommendation has been formed in conjunction with the Department of Commerce (DOC) expressly to address the need for a prospective system which would effectively eliminate this lengthy investigation and liquidation process. Their recommendation, along with a 2008 report from the Government Accountability Office and a 2010 DOC study conducted over 10years ago before there were over 600 AD/CV cases, is specifically designed to address multiple trade remedies and offer much needed regulatory relief to industry leaders.
Our Bond spotlight this summer is on the future and the COAC’s reasonable and responsible recommendation points towards and industry future that is brighter and more manageable for all.