(Wooden bedroom furniture, pictured above, may be free of Customs duties but could carry antidumping duties of 100% or more.)
When a company is working to establish the landed costs for a product they plan to import, they take a number of steps to ensure that their calculations are correct and they sell the product profitably. They negotiate a price with the vendor, they secure a quote from their freight forwarder and they work with their Customs broker to establish the tariff number and duty rate. If it warrants and they are interested, they might even secure a binding ruling from CBP.
But all of this can fall to the wayside if when they go to file their entry, they discover that a case has been opened to determine if the product they are importing is being “dumped” on the American market, which could lead to additional duties and tied up collateral and capital, jeopardizing their entire go-to-market strategy.
Antidumping is when goods are determined to be sold at less than fair market value. Domestic industry approaches the Department of Commerce to determine if goods were sold at less than fair market value and the International Trade Commission then determines injury. The International Trade Administration (under Commerce) will then request information from respondents including foreign manufacturers who are named by the domestic companies. It is of paramount importance that companies asked to respond do so timely and with the aid of professional counsel. Based on the answers received, they will determine ADD rates and instruction Customs to collect those additional dumping duties. Companies who do not elect to respond with comprehensive documentation can expect to fall into the “all-others” category which often carries a significantly higher duty rate than a specific exporter might.
Countervailing is when goods are determined to be subsidized. For both ADD and CVD, the goal is to drive domestic competition out of business leaving only foreign suppliers who then can set the price at whatever level they choose, perhaps at a cost to import that would be greater than the comparable domestic product would have been.
ADD/CVD duty is a danger because an importer can have product on the water or in the air and it isn’t the date of export from the foreign country, but rather the date of import into the United States. Also, because sureties (the insurance companies who underwrite Customs bonds) have been forced to pay out on bonds for companies who have gone out of business or disappeared, many require financial statements and collateral held in escrow to pay these duties.
Most dangerously, the duty deposited at the time of entry might not be the duty ultimately paid when the case is closed. At the end of the case, Commerce and CBP could come back and request additional duty to be deposited years later. It is possible as well that a refund could be issued, but unlike the standard 314 entry liquidation cycle with CBP for regular entries, these types of entries remain open.
We strongly recommend that importers be aware if they are doing business in an industry where antidumping and countervailing claims are a frequent occurrence. Items such as wooden bedroom furniture, steel, some agricultural products, solar panels, chemicals and other commodities are areas where there are a tremendous number of cases. Work with our Customs brokers to be aware of the potential risks.
If you find yourself stuck with a product that is subject to ADD/CVD, we will work to not only limit your exposure and the amount of capital you have to set aside, but also to enter the goods so that only the ADD/CVD merchandise goes unliquidated. This reduces your exposure to an investigation or audit by CBP when they can draw in entries for review that remain open.
Check out the Department of Commerce’s primer on ADD/CVD here.
Read CBP’s really deep ADD/CVD FAQ on their website.
Wikipedia covers the topic generally, but we suggest using US-based resources for specific requirements for entry.