Unrelated Importer and Producer
A special report by Riggle & Craven
The antidumping Duty issue needs to be examined from 2 different perspectives - that of the foreign producer and that of the unrelated U.S. importer. While they share a common interest in obtaining the lowest possible rate, they have different reasons for doing so, different responsibilities and different financial exposure.
The Foreign Producer
Summary: The foreign producer has the greatest control over the antidumping process and has most, if not all, of the burden of responding to the Department Questionnaires. The direct financial exposure of the foreign producer is slight and the primary risk is the loss of
customers and perhaps the entire
The Review Process: Antidumping duties are normally based on a comparison between actual sales prices in the home market or third country market and sale prices in the
market. Essentially the dumping margin is determined by measuring the amount by which adjusted prices in the
market are below those adjusted prices in the comparison market. The amount of the underselling is then placed over the total value of sales to the
market to determine the relevant percentage.
These amounts are calculated in an Aannual review@ process in which the U.S. Department of Commerce issues a complex multipart questionnaire to the foreign producer. This questionnaire seeks a sale by sale reporting for all transactions in the comparison market and the
market including various selling and transportation factors and adjustments. The questionnaire also seeks detailed information about the structure and organization of the producer, its relationships with other entities and the cost of production of the goods.
This information is subject to a process called verification. Verification is the equivalent of a tax audit and can be performed by the Department of Commerce to verify the accuracy of the information submitted. Verification are either passed or failed. A failure verification is a serious matter with significant adverse consequences. The determination that a verification failed can be based on any number of reasons, such as a failure to report certain sales, failure to identify a related supplier, failure to properly report a production cost, or other failure to fully cooperate. In such case the Department assigns a Afacts available@ rate as a substitute for the calculated rate. Depending on the nature of the failure, this rate is either a cooperative or uncooperative facts available rate. The facts available rates are arbitrary rate based on results from prior reviews or investigations. It is a substitute for the actual rate where the actual rate cannot be determined. While normally high, it is not a penalty or fine and is an ordinary duty treated in same fashion as other ordinary customs duties.
Financial Impact: The Foreign producer faces no direct financial consequences from the result of any review. Antidumping duties are the sole obligation of the importer of record and can only be paid by the importer of record. The antidumping duty law expressly forbids the refunding or rebating of the antidumping duties, whether directly or indirectly, by the foreign producer and any such refunds or rebates must be turned over to the
government by the importer of record as additional duties. The foreign producer does face indirect financial consequences as a high antidumping duty rate could adversely impact its importer-customers, would make its product less appealing in the
market and could raise into question its reputation as a reliable supplier.
Summary : The U.S. Importer has little, if any, control over antidumping duties and yet bears the most immediate and serious financial consequences.
The Review Process: The
importer makes entry of its merchandise and deposits estimated antidumping duties based on the producer=s rate. Then the
importer waits. If no review is requested, then the entry will be liquidated and the duties deposited will be collected. If, a review is requested, then the importer=s period of waiting is extended until after the conclusion of the review. As an unrelated importer has no data which impacts on the antidumping duty calculation, the Department of Commerce does not issue a questionnaire to the importer or otherwise seek the importer=s participation in the review. While the importer can participate, such participation is normally limited to monitoring the process and commenting on Department actions.
The importer becomes aware of the Department=s preliminary determination either when the importer is informed of the decision by the producer, reads of the decision in the trade press, or reads off of the decision in the Federal Register. Under rare circumstances such as a failure of verification or refusal to cooperate, the importer will then elect to participate in the administrative process by commenting on the decision, but normally, the importer will simply continue to wait.
The final determination, which is issued at some point after the preliminary determination, is normally communicated to the importer either by the producer or the trade press. Upon its publication in the Federal Register the U.S. Customs Service begins to collect a new deposit rate based on these results. In addition, 15 days after the final determination is published, in the absence of a court challenge, the Department of Commerce prepares and sends liquidation instructions to U.S. Customs. Within 6 months of the decision, absent a court challenge, Customs liquidates the entries. This is the process where Customs collects the duties deposited and issues a bill to the importer for any additional duties plus interest or issues refunds for any savings. For some importers, the liquidation notice and subsequent bill is the first communication from the
regarding this entry since the date of its filing.
Upon receiving this bill the importer normally has no options. The antidumping duty rate was set in the administrative proceeding and by the time any bill is received, the time to file a court challenge will have expired. The importer cannot collect any excess duties from the producer as such rebates and refunds are expressly not allowed under Federal Law. In sum, the importer=s duty is the result of factors beyond the importer=s control and depends upon the actions of unrelated producers. Thus, the most important thing for any importer is to make sure that you know and trust your producer and assure that they cooperate and fully respond to the
Riggle and Craven has experience in representing a wide range of foreign producers in antidumping proceedings and are ready to assist in developing a strategy to respond to Department Questionnaires and obtain the lowest possible rate from the Department. The key to a low rate is advance preparation and the proper structuring of the import transactions.
The law firm of Riggle & Craven is providing this as part of a commitment to advise of recent developments which are of importance to the international trade community. Permission to reproduce, photocopy, reprint or excerpt this advertising material is granted provided the source is attributed to Riggle & Craven. The information provided is in summary form and we urge readers to confirm any conclusions reached before taking action based on it.