Department of Justice Enforcement Action

U.S. Government Takes Aggressive Action against Surety to Recover Uncollected Antidumping Duties

Yesterday, the U.S. Department of Justice (DoJ) filed a complaint in the U.S. Court of International Trade (CIT) seeking to recover unpaid antidumping duties from a surety company, Hartford Fire Insurance Company.

The complaint filed at the CIT sheds light on some of the challenges faced by U.S. Customs and Border Protection (CBP) in collecting antidumping duties, while simultaneously demonstrating the agency’s commitment to ensuring that duties are collected.

The lawsuit itself relates to the importation of preserved (canned) mushrooms from China made in 2004.  In total, Sino Trend Inc. imported 55 shipments of canned mushrooms from China subject to antidumping duties between February and October of 2004.  Sino Trend had registered as a corporation with the state of California less than a year before (April 2003) it began to import large quantities of canned mushrooms.  Rather than pay antidumping duty deposits at importation, Sino Trend obtained single entry bonds from Hartford Fire Insurance Company for each of its entries of canned mushrooms from China.  The complaint asserts that Hartford also entered into a continuous bond (for an amount totaling $50,000 per bond period) with Sino Trend.

Sino Trend’s import entries were subject to the sixth administrative review of the antidumping duty order on Chinese preserved mushrooms, initiated on March 23, 2005.  In July of that year, the U.S. Department of Commerce (Commerce) announced that Sino Trend’s Chinese supplier, Guangxi Hengxian Pro-Light Foods, Inc., would not be subject to the administrative review.  In result, antidumping duties would be assessed at the duty deposit rate in place at the time of importation.

For reasons unexplained in the complaint, bills for payment of antidumping duties were not issued to Sino Trend until seven years after Sino Trend imported the merchandise (August 26, 2011).  Sino Trend did not respond to CBP’s request for payment for $1.4 million in uncollected antidumping duties.  The complaint indicates that the DoJ believes Sino Trend is no longer in business.

In October of 2011, CBP notified Hartford of the 55 bills outstanding and requested payment pursuant to the single entry bonds issued by the surety.  A second letter requesting payment was sent in November 2011.  The complaint asserts that Hartford made full or partial payments on 47 of the 55 single entry bonds issued.  Accordingly, the lawsuit was filed to recover a little over $200,000 remaining owed on the single entry bonds issued.

The facts alleged in the DoJ’s complaint are consistent with circumstances that confront enforcement of antidumping duties on many products, including shrimp.  In a prior proceeding, Commerce observed that Sino Trend Inc. was an American subsidiary of Guangxi Hengxian Pro-Light.  Accordingly, the company was established purely to facilitate the importation of goods subject to antidumping duties.  By the time CBP sought to collect significant antidumping duties ($1.4 million) the American subsidiary of the Chinese company had been dissolved.

Because these entries took place prior to October 1, 2007, any antidumping duties collected are distributed through the Continued Dumping and Subsidy Offset Act (CDSOA) to eligible parties in the domestic canned mushroom industry.  Fortunately for that industry, Sino Trend’s entries were subject to single entry bonds making substantial recovery possible.  However, outside of CDSOA, the use of the American subsidiary as the importer of record allowed the Chinese exporter and its American customers to evade the trade remedy at the time of importation, as no duties were deposited or ever paid by the importer.  In fact, had Guangxi Hengxian Pro-Light been subject to the sixth administrative review and received an antidumping duty rate larger than the deposit rate, CBP would likely have had no ability to collect additional duties because the single entry bonds were capped at the deposit amounts.

The details about antidumping duty collection become complicated very quickly.  Getting a rough understanding of these details is nevertheless vital to ensuring that antidumping duties are effective at addressing unfair trade.  Foreign exporters and U.S. customers of unfairly-traded goods have developed increasingly sophisticated schemes to evade trade relief.  Many of these schemes are contingent on establishing non-resident importers of record or paper importers, like Sino Trend, that can disappear when bills come due.

Understanding how pervasive these schemes are across industries has been a challenge.  However, enforcement efforts, such as those reflected in the DoJ’s complaint, shed essential light on these schemes and CBP’s initiative to collect antidumping duties.

Read the U.S. Department of Justice’s Complaint in Court No. 12-00414, United States v. Hartford Fire Insurance Co.

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