CHICAGO, August 11, 2011 /CHICAGOPRESSRELEASE.COM-iReach/ — Congress is poised to require Customs to investigate allegations that AD/CVD cases have been evaded. Under the pending bill importers will have very short deadlines to respond to allegations of evasion and could face extraordinarily high AD/CVD rates if there is a finding of evasion (200% and 300% rates are not uncommon in these cases).
The ENFORCE Act of 2011 has broad support in Congress, and will mandate that Customs conduct formal evasion investigations when petitioners make an allegation. These investigations would take place on very strict deadlines. “Some companies are definitely going to be hit with extremely high dumping duties simply because they couldn’t get information to Customs in a timely fashion. Being prepared before an allegation is made is going to be a key competitive advantage” said David Forgue, a partner in the Chicago office of Barnes, Richardson & Colburn.
The current legislation does not require that the importer knowingly evade the AD/CVD order to impose these extraordinarily high AD/CVD duties on imports. Instead, in cases where Customs either confirms that a higher AD/CVD rate is appropriate, or where an importer cannot support the rate it declared at entry, the imports will likely receive either an “all others” or “country-wide” rate for its imports. These rates can be very high. In addition, if there is a preliminary affirmative finding of evasion importers will likely be required to deposit cash to cover AD/CVD duties. This will negatively impact cash flow for many companies, since it could represent a cash outlay of two or three times the value of the imported goods, in some cases. Said Jeff Neeley, a partner in the Washington office of Barnes, Richardson & Colburn, “there will be companies that are driven out of business by these investigations.” Importers should also keep in mind that besides high AD/CVD cases, importers could also face Customs penalties related to their exercise of reasonable care with regard to their entries.
There are affirmative steps that companies can take to minimize their risk for AD/CVD evasion. Undertaking a thorough risk assessment to understand what imports are most likely to face scrutiny is the first step. It is also important that companies review transactions with an eye toward potential evasion, and document transactions to maximize the likelihood of refuting an evasion allegation. Importers must remember that evasion can be very lucrative for some manufacturers and suppliers, so there is a strong incentive to hide the evasion from customers. Third, companies need policies and procedures in place to ensure compliance with existing and future AD/CVD orders. These policies and procedures need to be fully implemented, and implementation needs to be regularly monitored. Finally, because AD/CVD evasion can represent bet-the-company risk, it is vital to ensure that an evasion review is part of any due diligence undertaken in a merger or acquisition.
Barnes, Richardson & Colburn is uniquely qualified to evaluate the evasion risk to importers, in M&A matters, and to defend importers in evasion investigations. The firm has over 90 years of Customs experience, and significant global AD/CVD experience. Download Barnes, Richardson & Colburn’s White Paper on the coming evasion law here and contact any firm attorney if you have questions.
Media Contact: David Forgue Barnes, Richardson & Colburn, 312 297-9555, dforgue@barnesrichardson.com
SOURCE Barnes, Richardson & Colburn