No importer wants to pay ADD or CVD. However beware of circumvention!

I completely understand that ADD and CVD duties can be very onerous. As importers try to find ways to avoid ADD and CVD, it is extremely important that they are aware of the danger of circumvention. The domestic companies who are behind the bringing of ADD and CVD cases are heavily invested in making sure importers pay the correct ADD and CVD. Therefore they will be watching for importers who trying to circumvent the ADD and CVD Cases.

What is circumvention?

There are two main types of circumvention that importers should be aware of.

1.) Trans-shipment

Shipping the product from the origin country to a middle-country and then importing the goods to the United States while claiming the goods are from this middle country. Don’t do it! Don’t even think about it. It is illegal. Importers can and will be prosecuted by the U.S. government.

2.) Changing their products in an attempt to avoid paying ADD and CVD.

This is a bit more tricky and is worth discussing. The DOC has the right to investigate whether a product is considered “later-developed merchandise.” If the product is found to be “later-developed merchandise,” it can be brought within the scope of the ADD and CVD cases even though the product was initially not within the scope of the cases.

The most recent example is the ADD case regarding honeyfrom China. For those unfamiliar with the case, initial AD duties for honey from China ranged from 25.88% to 183.80%. Covered under the scope was “natural honey, artificial honey containing more than 50 percent natural honey by weight, preparations of natural honey containing more than 50 percent natural honey by weight and flavored honey. The subject merchandise includes all grades and colors of honey whether in liquid, creamed, comb, cut comb, or chunk form, and whether packaged for retail or in bulk form.” Importers apparently have been bringing in honey blended with rice syrup in order to avoid ADD and CVD. This was brought to the attention of the DOC, who ruled that honey from China blended with rice syrup, regardless of the percentage of honey, was circumventing the ADD and CVD orders. Customs suspended the liquidation of the products, which were brought within the scope of the ADD and CVD orders.

What should importers do?

As mentioned above, don’t even think about trans-shipment.

However if the importer is thinking about developing a new product that is outside the scope of the ADD & CVD orders, please be extremely careful. If the DOC finds that the product is considered “later-developed merchandise,” the products can still be brought within the scope of the ADD & CVD order. It helps to understand what the DOC will be evaluating when making this determination. The DOC shall consider the following criteria during their investigation:

(A) Whether the later-developed merchandise has the same general physical characteristics as the merchandise with respect to which the order was originally issued (‘‘earlier product’’);
(B) Whether the expectations of the ultimate purchasers of the later-developed merchandise are the same as for the earlier product;
(C) Whether the ultimate use of the earlier product and the later-developed merchandise is the same;
(D) Whether the later-developed merchandise is sold through the same channels of trade as the earlier product;
(E) Whether the later-developed merchandise is advertised and displayed in a manner similar to the earlier product”

If an importer really intends to go through with the development of a new product, I would highly recommend consulting with a trade attorney. The time, money, and effort spent on a new business model can all be for naught. A trade attorney can advise whether the product is in danger of being considered “later-developed merchandise.”

-Jimmy Ting

jimmyting@great-world.com

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