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Compliance: what are the trade risks (part 1)

by Janet.Labuda@FormerFedsGroup.Com

Over the last few weeks, I have written a series of short articles discussing the need for developing a compliance-based approach to transacting international trade. This will help to prepare your organization to effectively deal with the risks inherent in importing.

What are these risks that continue to be the focus of U.S. Customs and Border Protection (CBP)? There are various operational policies and programs that give insight into the agency’s concerns. The most important is the identification of Priority Trade Issues (PTIs). Currently, CBP considers the agency’s trade enforcement priorities to be:

Antidumping and Countervailing Duty case administration and enforcement;

Import Safety;

Intellectual Property Rights protection;


Textiles; and

Trade Agreements.

In CBP’s own words “Priority Trade Issues (PTIs) represent high-risk areas that can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people. They drive risk-informed investment of CBP resources and enforcement and facilitation efforts, including the selection of audit candidates, special enforcement operations, outreach, and regulatory initiatives.”

Currently, a greater emphasis is being placed on the enforcement of the anti-dumping and countervailing duty orders. Dumping is a predatory trade practice and occurs when a product is exported to a market at a price below the cost of production or what it would be sold at in its home market. These practices cause a competition imbalance with domestic industry production in the importing country.  When it determines that the domestic industry is being harmed by this practice, the United States imposes dumping duties in order to balance the playing field and bridge the fair market value gap.

In addition, the importing country may impose countervailing duties when it determines that a foreign government provides assistance and subsidies, such as tax breaks, to manufacturers that export goods enabling these manufacturers to sell their goods cheaper than the importing country’s domestic manufacturers. The newly applied duties are calculated to duplicate the value of the subsidy.

Presently, the United States has 372 anti-dumping and countervailing duty orders in place. China is the subject of 140 orders followed by India with 31, and South Korea with 24. The majority of scope orders involve iron and steel milled products, pipe, and castings. This is followed by 22 orders in the agricultural and processed food sector.  Because these orders can impose very high duty rates on products coming from certain companies and countries there is an inherent concern that the orders will be circumvented.

Ways to circumvent the orders include corporate identity theft, counterfeiting of documents, misdescription of product to change its Harmonized Tariff classification, incorrect declaration of the country of origin, and undervaluation of the product. When I worked on order enforcement I regularly saw a combination of all methods occurring. In order to level the competitive playing field, and protect the revenue, CBP is focused on ensuring compliance with the orders.

On February 16, a trade coalition of leading business executives called The Committee to Support U.S. Trade Laws (CSUSTL) met on Capitol Hill calling for greater enforcement of trade laws with a special emphasis on anti-dumping and countervailing duty enforcement. The group is calling for more resources to carry out enforcement, for the closing of trade law loopholes, and for a faster response time to ensure greater compliance gains.

Companies should be performing compliance checks on their imports to ensure accurate declarations to CBP. If any element of the normal sourcing pattern shifts,  consider this a red flag. It is incumbent upon you to verify and validate the information provided in the transaction. Taking a few steps to peek behind the veil of the transaction will put your company in a position to address enforcement reviews quickly and effectively.


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Important: FormerFeds, LLC is not a law firm. We do not provide legal advice. Our PerfectShield™ compliance solution should always be administered with the advice and under the guidance of legal counsel. Read more