Last week, U.S. Customs and Border Protection (CBP) posted two Notices of Action (NOAs) regarding allegations submitted pursuant to the Enforce and Protect Act (EAPA).  The NOAs—one to initiate an allegation and one notice of non-initiation—are the first that have been posted since CBP established its interim rules for EAPA allegations in August 2016. These new notices provide initial insight into the criteria governing CBP’s initiation determinations.

Passed as part of the Trade Facilitation and Trade Enforcement Act of 2015, the EAPA established a formal process for CBP to investigate allegations of the evasion of antidumping and countervailing duty orders.  Under the EAPA, CBP will initiate an investigation if provided with information that “reasonably suggests” that merchandise subject to an antidumping and/or countervailing duty order has entered the United States through evasion. However, the statute does not define “reasonably suggests,” and there has been considerable speculation in the trade community regarding the type of information that CBP will deem sufficient to initiate an investigation.

The first of the two new NOAs concerns an allegation regarding imports of merchandise covered by the antidumping and countervailing duty orders on circular welded carbon quality steel pipe from China.  The alleging party, Wheatland Tube Company, claimed that a company called NEXTracker had been importing circular welded carbon quality steel pipe from China “at prices well below those necessary to reflect the applicable cash deposit rates and eventual duty assessment.”  In support of its allegation, Wheatland submitted data regarding the quantity of imports entered by NEXTracker, as well as general import data for the merchandise at issue.  Relying on the average unit value of all circular welded carbon quality steel pipe imported into the United States from China, Wheatland estimated that NEXTracker would have owed $81.5 million in duties on its imports and asserted that it “defies credulity and commercial reality to accept that NEXTracker” paid this amount.  Thus, Wheatland alleged, the only “plausible explanation” was that NEXTracker entered merchandise without paying the required cash deposits.

CBP found that this allegation did not reasonably suggest that merchandise had entered the United States through evasion.  CBP noted that the allegation was premised on Wheatland’s estimate of what NEXTracker’s duties would have been based on data that were not specific to NEXTracker and “provided no evidence, beyond mere supposition, to reasonably suggest that NEXTracker’s entries were made by material false statements or act, or material omission, that resulted in the reduction or avoidance of applicable” antidumping and countervailing duty cash deposits.  Therefore, CBP did not initiate an investigation based on this allegation.

The second NOA indicates that CBP has initiated an investigation into Eastern Trading NY Inc.’s imports of steel wire garment hangers from China, and has imposed interim measures to halt purported evasion.  The alleger, M&B Metal Products Company, Inc., asserted that Eastern Trading’s steel wire garment hangers were being transshipped though Thailand by Everbright Clothes Hanger (Thailand) Co., Ltd. to avoid payment of antidumping duties.  In support of this allegation, M&B submitted information—including pictures of Everbright’s facility, information from a researcher who had visited and spoken with people involved with the facility, and Everbright’s financial statement—indicating that Everbright was not capable of manufacturing the quantity of steel wire garment hangers that were being imported by Eastern Trading.  M&B also provided information on the ties between Eastern Trading, Everbright, and companies in China, as well as the timing of Everbright’s establishment.  CBP determined that this information reasonably suggested that there was no (or insufficient) manufacturing in Thailand to support Eastern Trading’s imports and, consequently, that merchandise subject to an antidumping order was entering the United States through evasion.  Therefore, CBP initiated an investigation.

In addition, the NOA outlined interim measures CBP was taking as a result of its investigation.  Specifically, subsequent to its decision to initiate an investigation, CBP requested additional information from Eastern Trading regarding the merchandise at issue, such as production records and information on Everbright’s manufacturing and export activities.  CBP also visited Everbright’s facility in Thailand.  CBP found not only that there were significant discrepancies between the information submitted by Eastern Trading and that collected during its on-site visit, but also that Everbright was unable to produce the quantities imported by Eastern Trading.  Accordingly, as interim measures, cash deposits under the antidumping order were required on all entries of merchandise covered by the investigation, all entry documents and duties are required before any future imports for Eastern Trading may be released into commerce, and liquidation has been suspended for entries that entered after the date of initiation of the investigation.  CBP’s final determination in this investigation is due August 7, 2017, but can be extended until October 6, 2017.

Antidumping and countervailing duty orders provide important and much needed relief to domestic manufacturers and their workers from unfairly traded imports.  However, this relief can be muted if orders are not effectively enforced.  The EAPA serves as another tool in the trade remedies arsenal that domestic manufacturers, unions, and trade associations can utilize to help promote enforcement of antidumping and countervailing duty orders.  CBP’s NOAs provide important information for parties that believe antidumping and countervailing duty orders are being evaded and/or may be considering submitting an allegation on how CBP will approach the EAPA process.  More information on the EAPA and CBP’s procedures, as well as the NOAs, is available at https://www.cbp.gov/trade/trade-enforcement/tftea/enforce-and-protect-act-eapa.