When importing products into the United States, some commodities are subject to Non-Tariff Barriers, which include quotas, licenses, subsidies and additional duties. These barriers are designed to discourage demand of an imported product, protecting domestic producers from foreign competition.
Higher tariffs or additional tariffs are often placed on commodities that are deemed import sensitive. One of the mechanisms used by the United States Department of Commerce is the use of Antidumping (AD) and Countervailing (CVD) dumping duties. These duties are applied to imported products when it has been determined that a U.S. industry could be harmed due to an influx of cargo that would be sold at less-than-fair value.
What is the difference between AD and CVD duties?
Anti-dumping (AD) duties are applicable when foreign manufacturers sell goods in the United States at a less-than-fair value, causing injury to the U.S. industry. AD duties can be vendor specific or applied as a country-wide rate, both of which are determined by the U.S. International Trade Commission (USITC) through various investigations and determinations.
CVD duties are applicable when a foreign government provides assistance and subsidies, such as tax breaks to manufacturers that export goods to the U.S., enabling the manufacturers to sell the goods cheaper than domestic manufacturers. CVD cases are country specific, and the duties are calculated in a way that duplicates the value of the subsidy.
How are AD and CVD duties established?
- U.S. industries or companies, may petition the government for relief from imports that are sold at less-than-fair value ("dumped") or which benefit from subsidies through foreign government programs.
- The U.S. Department of Commerce is responsible for determining whether dumping or subsidizing exists and, if so, the margin of dumping or amount of the subsidy.
- The U.S. International Trade Commission (USITC) then determines whether there is material injury or threat of material injury to the domestic industry due to the dumped or subsidized imports.
How can U.S. importers research products to know if AD or CVD duties will apply upon importation?
The U.S. International Trade Administration (ITA) hosts country specific information on their website, which can be viewed here.
For example, if you follow the link, you will see a list of countries with a blue triangle next to each country. When you click the blue triangle, the list will expand to include various commodities with AD/CVD information. Below are a few specific examples:
- An AD duty rate will be applied for Apple Juice Concentrate, Non Frozen from China
- An AD and/or CVD duty rate will be applied for Steel Nails from Vietnam
- An AD and/or CVD duty rate will be applied to Certain Pasta from Italy
(Fun Fact: Pasta from Italy is the oldest example of AD and CVD duties applied to U.S. imports)
- An AD and/or CVD duty rate will be applied to Honey from Argentina
What are some of the most commonly imported products that will qualify for AD or CVD duties?
Some of the most common AD/CVD products include aluminum extrusions, nails, pencils, plastic bags, ribbons, shrimp, steel pipe, tires, tissue paper and wooden bedroom furniture. When importing these products, the importer should be aware that additional duties could apply, therefore, increasing the cost of the goods.
How does the import process change if AD or CVD applies?
Due to the fact that liquidation is suspended on AD/CVD entries for an indefinite time period, some clients request that the AD/CVD portion of their shipment be separated from the rest of the entry to allow the non-AD/CVD goods to liquidate in a timely manner. Most times though, AD/CVD entries are processed just like regular entries.
A Non-Reimbursement statement will be required from the importer, which can be provided on a shipment by shipment basis or a blanket statement can be provided. The importer and their broker must show diligence in holding the documentation for this type of entry for five years AFTER the file liquidates, not five years from date of entry.
Failing to properly flag products as AD or CVD can subject the importer to investigation as well as additional fines and penalties.
Are there any other important things U.S. importers should know about AD and CVD duties?
It is important to understand that AD and CVD files can remain open for years. Typical customs entries liquidate within one year of entry. However, AD and CVD files can remain open for years.
Why is this important? The actual duty rate assessed will be the active AD/CVD at the time of liquidation. AD and CVD duty rates undergo reviews no later than 5 years from imposition (known as a Sunset Review). If the U.S. industry is no longer under threat, the duty rate could be reduced or eliminated. If the U.S. industry is under additional threat, the duty rate could increase.
AD and CVD duty rates can range from 7% to 230%, depending on the product and the country of origin.
Another important item for U.S. importers to know about is the impact AD or CVD cases can have on the importer's Customs Bond. Due to the increased risk for the surety company that writes the bond, the surety company will require a higher bond amount, subsequently increasing the overall cost of the bond for the importer. The surety company may also require additional documentation, completion of special questionnaires and in many cases, partial or full collateral for the bond amount. Learn more about how Customs Bonds differ when importing AD and CVD applicable products in this document.
How can a Licensed Customs Broker (LCB) help importers maintain compliance and control costs?
Due to continuous education requirements and constant access to regulatory changes, U.S. importers can benefit from an LCB's vast knowledge and experience.
To become an LCB, individuals must first pass an entry exam (average national pass rate is below 15% which is lower than the national bar exam), pass a background check and interview with CBP (Customs and Border Protection). Many brokers encourage their LCB’s to participate in additional educational opportunities each year, completing coursework or continuing education classes each year. This level of training and knowledge can helps importers comply with U.S. laws and regulations while also appropriately estimating duties and taxes.
Essentially, LCBs can help U.S. importers understand and be aware of any additional costs which could be incurred during the import process as well as look at options to source the product from other countries or change their product to fall out of the scope of the AD/CVD case. The expert insight offered by LCB’s can potentially help U.S. importers avoid paying high AD/CVD duties while maintaining compliance.
Contact Marisol International today to learn more about AD and CVD duties.