China import duties
When it comes to China trade, there’s a new sheriff in town

Less than a week before Chinese President Xi Jinping’s scheduled visit to the United States, President Trump on Friday, March 31, 2017, issued an Executive Order “Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws.” This order is aimed at collecting unpaid antidumping and countervailing (“AD/CVD”) duties on U.S. imports of foreign goods, including (particularly?) goods coming into the United States from China. If you are importing products from China or thinking of doing so, this post is relevant for you because a significant percentage of existing U.S. antidumping orders cover goods from China and many of these are covered by countervailing duties as well.

Though U.S. importers are ultimately liable for the AD/CVD, many of these importers are non-residents without sufficient assets in the United States to pay AD/CVD when due. U.S. Customs and Border Protection imposes bond requirements for imports, but where goods are subject to AD/CVD, normal bond amounts securing payment are often substantially less than the AD/CVD ultimately owed. To address these nonpayment issues, the Executive Order requires the Secretary of Homeland Security, through Customs, to develop a plan within the next 90 days to require new and existing importers that pose a risk of revenue loss to the United States provide security through a bond or legal measures. This Executive Order requires Customs establish an importer risk assessment program to review the risk of revenue loss from unpaid AD/CVD and consider increasing bonding requirements.

This means many new importers of goods from China (and elsewhere) subject to AD/CVD and those with a history of late payments likely will see their customs bond amounts increase. This is costly to import businesses since the bond surety requires cash collateral. With the new directives in the Executive Order, now is a good time for companies to assess the merchandise they import and if any of that merchandise is subject to AD/CVD, to ensure it has procedures and controls in place to monitor AD/CVD declarations at entry.

In addition to enhanced customs bonding, the Executive Order also calls on the Secretary of Homeland Security to develop a plan within the next 90 days “for combatting violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise . . . .” The Executive Order also addresses intellectual property enforcement at the border.  by mandating that the government share with rights holders information about intellectual property rights infringement and abandoned merchandise.

Lastly, the Executive Order instructs the Attorney General develop recommended prosecution plans and allocate resources to Federal prosecutors for prosecution of trade law violations. Though AD/CVD and intellectual property have been priority trade issues for many years and the federal government has been free to pursue criminal actions, most enforcement has been via civil penalties and/or product seizures. The call for a criminal prosecution plan and increased prosecution resources to pursue such a plan no doubt will lead to an increased focus on criminal penalty actions for customs and trade violations. To put it bluntly, many trade violations that formerly led to penalties and fines could mean jail time under our new administration. Immediately after the issuance of this Executive Order, Customs announced that it is ready to follow through on the Trump directives. See CBP To Implement Executive Order.

Bottom Line. If you are importing product from China (or any other country), now is the time to double check what you are doing with your trade and customs programs and to make darn sure that you are not bringing in product that will cost you a lot of money or maybe even jail time. There is a new sheriff in town and he does not like imports.