As evidence mounts that foreign exporters are increasingly circumventing U.S. trade laws, in order to undermine American producers, a bipartisan group of U.S. Senators introduced legislation to create the discipline necessary at Customs and Border Protection (CBP) to stop these trade cheats and level the playing field for U.S. manufacturers and workers.
The Enforcing Orders and Reducing Circumvention Evasion Act (ENFORCE) requires CBP – the federal border cops – to quickly investigate allegations of U.S. trade remedy law evasion in order to combat the disastrous effects evasion has had on domestic manufacturing.
The ENFORCE Act is sponsored by U.S. Senators Ron Wyden (D-OR) the chair of the Senate Finance Committee’s subcommittee on International Trade, Olympia Snowe (R-ME), Claire McCaskill (D-MO), Roy Blunt (R-MO), Sherrod Brown (D-OH), Rob Portman (R-OH), Chuck Schumer (D-NY), and Richard Burr (R-NC).
What is the primary way in which unfair trade is addressed?
Currently, U.S. law enables domestic producers to petition the U.S. Department of Commerce (Commerce) to investigate whether imports are traded unfairly. If the government finds that the imports were traded unfairly and that the imports cause economic harm to domestic producers, it can apply special import duties to the products in question.
What are unfairly trade imports?
Imports that are believed to be sold at less than normal value are considered “dumped.” This often occurs when a manufacturer is not impacted by market forces or when they are willing to temporarily sell goods at a loss for the purpose of obtaining long-term, increased market share.
Imports that received government subsidies are often considered unfairly traded.
What are the “special” import duties?
“Anti-dumping (AD)” duties are imposed on imported merchandise that is determined to be dumped. “Countervailing duties (CVD)” are imposed on imported merchandise that is determined to be government subsidized.
What’s the problem?
These trade “remedy” laws, AD/CVD, are only effective to the extent they are enforced, and importers are increasingly employing schemes to avoid paying AD/CV duties. A common scheme is for a supplier of merchandise subject to AD/CVD (say from China) to ship their merchandise through a third country (like Singapore) before it arrives into the U.S. This supplier will claim that the merchandise is of Singaporean origin rather than Chinese and, since the AD/CVD order applies to country-specific merchandise, the merchandise would not subject to AD/CVD if the scheme is successful. In international trade lingo, this is called “transshipment” but it is effectively merchandise laundering.
What is the impact of AD/CVD evasion?
When AD/CV duties are evaded the U.S. loses millions of dollars in AD/CV duties. Also, American producers are harmed economically because the remedy dumping and subsidization is circumvented.
What would the ENFORCE Act do to stop evasion of AD/CVD?
The ENFORCE Act of 2011 is designed to combat the evasion of AD/CVD orders and better enforce the trade remedy statutes that are currently on the books. The ENFORCE Act would:
- Formalize a process by which allegations of evasion are acted on. Because Customs and Border Protection (CBP) primarily relies on the private sector to identify evasion of AD/CVD, the ENFORCE Act would formalize that process by allowing stakeholders to file a petition alleging evasion and require CBP to initiate an investigation pursuant to the petition within 10 days.
- Establish a rapid-response timeline by which CBP would investigate allegations of evasion. The ENFORCE Act would give the CBP 90 days, after an investigation of evasion begins, to make a preliminary determination into whether there is a reason to believe an importer is evading an AD/CVD order. If an affirmative preliminary determination is made, the ENFORCE Act requires CBP to use its existing authorities (which are not now used consistently or in a timely manner) to ensure that the correct amount of duties can be collected if, at the end of an investigation, CBP determines that that AD/CV duties are owed. The ENFORCE Act requires CBP to make a final determination as to whether merchandise subject to an investigation under the bill entered into the U.S. through an evasion scheme, by 120 days after CBP issued a preliminary determination. Flexibilities are added to these timelines for cases that are complex.
- Information sharing. Combating evasion requires coordination among several different government agencies. Furthermore, many of the same schemes that importers employ to evade an AD/CVD order, like mislabeling, often shirk regimes the U.S. has in place to ensure that products are safe for consumption or use. The ENFORCE Act would establish clear instruction and guidelines to promote appropriate information sharing among the various federal agencies to better combat evasion and protect consumers from unsafe goods.
- Accountability. CBP’s broad mandate to facilitate trade, enforce trade remedy laws, and protect national security often leads to inconsistent efforts to combat evasion of the trade remedy laws. The ENFORCE Act would require CBP to provide annual reports to the Congress about the effectiveness of its enforcement efforts and the job it is required to do to protect American producers from the harm of unfairly traded imports.
Information on the Subcomittee Hearing on Enforcing America’s Trade Laws in the Face of Customs Fraud and Duty Evasion
- Opening Remarks (as prepared)
- List of Witnesses & Webcast
- Investigative Report Exposing Rapant Duty Evasion (download)
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