On August 14, 2017, U.S. Customs and Border Protection (CBP) issued its first final affirmative determination of evasion pursuant to the Enforce and Protect Act (EAPA).  The EAPA was passed as part of the Trade Facilitation and Trade Enforcement Act of 2015 and established a formal process for CBP to investigate allegations of evasion of antidumping and countervailing duty orders.  CBP determined that substantial evidence demonstrates that certain imports of steel wire garment hangers from the People’s Republic of China (China), which are covered by an antidumping duty (AD) order, entered the United States through evasion.

In response to an allegation filed by M&B Metal Products Company, Inc., CBP initiated an investigation on October 11, 2017 into Eastern Trading NY, Inc.’s (Eastern Trading) imports of steel wire garment hangers from China, noting that the allegation reasonably suggested that Eastern Trading imported hangers from China that had been transshipped through Thailand and failed to pay the AD cash deposits in place for the merchandise.  On December 13, 2016, CBP issued a notice of initiation and notified interested parties of CBP’s decision to take interim measures based on reasonable suspicion that Eastern Trading did enter covered merchandise into the United States through evasion.

CBP determined that there is substantial evidence that Eastern Trading entered covered merchandise into the United States that had been transshipped through Thailand.  For instance, CBP found that:

  • The on-site visit of the facility of Eastern Trading’s reported supplier, Everbright Clothes Hanger (Thailand) Co., Ltd. (“Everbright”) in Thailand as well as Everbright’s financial statements, indicates that Everbright did not have the capability to actually manufacture the quantity of hangers it exported to Eastern Trading in terms of machinery, personnel, and supply.
  • Over 80 percent of Eastern Trading’s imports of hangers can be linked to shipments from China through Thailand.
  • Information from the administrative record of the new shipper review under the AD order obtained from the Department of Commerce, in particular with regard to Everbright’s ownership, further supports a conclusion that Everbright was used to transship hangers from China.
  • During the period of investigation, Eastern Trading also received shipments of hangers directly from China marked with Everbright’s name.

Eastern Trading argued that it would be inequitable for CBP to assess antidumping duties and penalties on the company because it had no knowledge of the scheme and did not profit from it.  CBP dismissed Eastern Trading’s argument, noting that the statute’s definition of evasion only focuses on whether insufficient cash deposits or bonds were made, not the culpability of the parties.

In accordance with CBP’s final determination, CBP will continue to suspend liquidation for any entries on or after the date of initiation of this investigation, October 11, 2016.  Further, CBP will continue to extend the period for liquidation for all unliquidated entries that entered prior to that date.  CBP will continue to request that Eastern Trading post cash deposits on its entries and will require live entry for any future imports of covered merchandise, meaning Eastern Trading will be required to post cash deposits prior to release of the merchandise.  Lastly, Eastern Trading’s continuous bond will remain at the increased level and will be reviewed in accordance with CBP’s policies.  CBP noted that it will pursue any additional enforcement action under the EAPA as appropriate, such as penalty proceedings and referral to U.S. Immigration and Customs Enforcement for civil and/or criminal investigation.

CBP’s final determination is significant.  The critical relief provided to the domestic industry from unfairly traded imports pursuant to antidumping and countervailing duty orders may be limited if such orders are not effectively enforced.  CBP’s first affirmative final determination of evasion pursuant to the EAPA indicates that the EAPA will be an effective tool in ensuring that the requisite antidumping and countervailing duties are properly being paid on covered merchandise and domestic manufacturers and their workers are being provided the full extent of the relief they deserve.