U.S. Customs and Border Protection (CBP) recently published interim regulations pursuant to the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) that establish a formal process for private parties to request that CBP investigate claims of evasion of antidumping and countervailing duty (AD/CVD) orders. Importers should take notice, as the interim regulations enhance CBP's ability to detect AD/CVD evasion, and will likely lead to an uptick in enforcement activity. The interim regulations are already in effect, but can be revised after a public comment period that ends on October 21, 2016.

Our takeaways on the interim regulations are the following:

• CBP's new process to investigate evasion is more definite and transparent than its predecessor. CBP previously accepted evasion allegations, but the agency was never required to initiate investigations, nor was it required to inform parties to an investigation of any enforcement steps taken. In contrast, the new process requires CBP to take certain actions within specified timeframes (e.g., CBP must conclude most investigations within 300 days), affords private parties that file allegations the opportunity to participate in the investigation, and obligates CBP to inform parties to an investigation of key developments (e.g., initiation, allegation determinations).
   
• But parties will have limited access to confidential information. Unlike AD/CVD cases, there is no Administrative Protective Order (APO) process that permits counsel for parties to an investigation to review business confidential information submitted by other parties. Instead, parties to an investigation will receive public summaries of business confidential information. Barring access to this information may ultimately constrain parties' ability to submit effective written comments in an evasion investigation.
   
• It is not yet clear how CBP will interact with the Department of Commerce (DOC) on scope inquiries. If CBP is uncertain as to whether merchandise subject to an evasion allegation is within the scope of an AD/CVD order, CBP may suspend the investigation and refer the matter to DOC for a scope determination. Beyond this, the interim regulations are silent as to how the DOC and CBP will interact during a scope referral. Whether such a referral would be addressed as a scope ruling request -- which can take years -- or through a less formal process remains to be seen.
   
• The consequences of an affirmative evasion determination can be severe. An importer found to be evading an AD/CVD order will be liable for the unpaid AD/CVD duties for as much as the previous five years, plus a penalty, and will be required to post cash deposits on future entries of the covered merchandise. CBP can take additional enforcement measures, including referring the matter to other agencies -- such as Immigration and Customs Enforcement (ICE) -- for possible civil or criminal investigation.

Our answers to frequently-asked questions about the interim regulations are below.

Q 1: What are AD/CVD duties?

AD/CVD duties are import duties assessed to offset dumping (i.e., the sale of imported goods at less than fair value) and countervailable subsidies provided by foreign governments to foreign manufacturers (e.g., direct cash payments, below-market loans). AD/CVD duties are calculated by DOC and collected by CBP.

Q 2: How do the interim regulations define "evasion"?

The interim regulations define "evasion" as entering merchandise subject to AD/CVD orders by means of an act or omission that is material and false, and which results in AD/CVD duties being reduced or not collected. Examples of evasion include the misrepresentation of the merchandise's true country of origin (e.g., through fraudulent country of origin markings on the product itself or false sales), false or incorrect shipping and entry documentation, using the wrong tariff subheading or mischaracterizing the merchandise's physical characteristics.

Q 3: Who may submit an evasion allegation to CBP?

Either an "interested party" or another federal government agency (e.g., DOC) can file a request for CBP to initiate an evasion investigation. The interim regulations define the term "interested party" broadly to include importers and foreign manufacturers, U.S. manufacturers, labor unions and trade associations.

Q 4: May all interested parties fully participate in an evasion investigation?

Not necessarily. The interim regulations state that only parties to the investigation (i.e., the party that filed the allegation and the importer who allegedly engaged in evasion) may have access to the information in the investigation and may rebut information provided by other parties. It is unclear whether other interested parties (i.e., those not filing an allegation) will have access to the public information in the investigation on which to base written arguments to CBP. Federal agencies who request an investigation will not become a party to the investigation and will not receive official updates or submissions related to the investigation.

Q 5: What information must be contained in an evasion allegation?

Each evasion allegation must contain specific background information regarding the party and its allegations (i.e., the name of the importer against whom the allegation is filed, a description of the covered merchandise and applicable AD/CVD orders) as well as "information reasonably available" to support the allegation (e.g., specific documentary proof, newspaper articles, affidavits).

Q 6: When will CBP initiate an investigation?

CBP will initiate an investigation when the following conditions are satisfied: (1) the merchandise described in an evasion allegation is properly within the scope of an AD/CVD order and (2) the information provided "reasonably suggests" that covered merchandise has been entered through evasion.

Q 7: Who is charged with investigating evasion?

Evasion investigations will be conducted by the Trade Remedy Law Enforcement Directorate, a new division within CBP's Office of Trade.

Q 8: How will CBP investigate an evasion allegation?

The interim regulations provide several methods by which CBP may obtain information in an investigation: CBP will obtain information from its own files, from other U.S. government agencies, from questionnaires and correspondence with interested parties and alleged evaders and through fieldwork by CBP officials (e.g., facility visits and interviews). CBP may, at its discretion, conduct verifications of information collected during an investigation in the United States or abroad. If a party to an investigation does not act to the best of its ability to provide information, CBP will make an adverse inference (i.e., "an inference adverse to the interests of the party in selecting from facts otherwise available").

Q 9: Will CBP provide notice to the alleged evading importer?

Yes, but not necessarily promptly. CBP will notify all known parties to an investigation within 95 calendar days of initiating the investigation. Moreover, CBP will notify all parties to an investigation within five business days of making an evasion determination.

Q 10: Can the subject of an investigation file a prior disclosure?

Yes, but only if the subject has no knowledge of the investigation. The CBP regulations provide that, in order to receive credit for a prior disclosure, the disclosure must be filed before, or without knowledge of, the commencement of a formal investigation. However, it is unclear under the interim regulations whether a petitioner may complicate this issue by serving its petition on an importer or otherwise publicizing an allegation.

Q 11: Will the public know about an investigation?

Probably not. The interim regulations do not require CBP to notify the public of an open investigation.

Q 12: Will CBP release business confidential information to all parties in an investigation?

No. Unlike DOC AD/CVD cases, there is no APO process by which other parties to an investigation or their counsel may view business confidential information. The interim regulations provide that parties who submit business confidential information may mark it with single brackets and provide a public version of the submission in sufficient detail to permit a reasonable understanding of the substance of the information, or a full explanation of why summarization is not possible.

Q 13: Will the parties to an investigation be allowed to submit arguments in support of their positions?

Yes. The parties to an investigation may submit written arguments based upon the facts in CBP's administrative record.

Q 14: How will CBP ensure that appropriate duties are collected during an investigation?

The interim regulations authorize CBP to take "interim measures" within 90 calendar days of initiating an investigation where it determines that "reasonable suspicion" exists that evasion has occurred. Under this mechanism, CBP may suspend the liquidation of merchandise entered after the investigation was initiated and extend the period for liquidating merchandise that entered before the investigation was initiated. CBP may also take additional measures as necessary, such as requiring a single transaction bond or requiring additional security or the posting of a cash deposit with regards to covered merchandise.

Q 15: What happens if there is uncertainty as to whether merchandise subject to an evasion allegation is within the scope of an AD/CVD order?

If CBP is uncertain as to whether merchandise subject to an evasion allegation is within the scope of an AD/CVD order, CBP may refer the matter to DOC for a scope determination. This ensures that scope determinations relating to an AD/CVD order continue to be made by only one U.S. government agency. The deadlines for the evasion investigation are suspended while DOC reviews the scope issue. Complex scope issues may take over one year to conclude (and are subject to judicial review, which would further delay the investigation).

Q 16: What standard will CBP apply to determine if evasion has occurred?

CBP will make a determination based on "substantial evidence" as to whether evasion has occurred. "Substantial evidence" is not defined in the interim regulations, but has been defined as "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).

Q 17: Will CBP provide an explanation when it issues a final determination?

Yes. No later than five business days after making an affirmative evasion determination, CBP will send a summary of its determination limited to publicly available information to the parties to an investigation.

Q 18: What happens if CBP determines that evasion has occurred?

If CBP makes an affirmative determination of evasion, it will: (1) suspend liquidation of unliquidated entries of merchandise covered under the provision; (2) extend the period for liquidating covered merchandise that entered before the initiation of the investigation; (3) notify DOC of the determination and request DOC determine the appropriate duty rates for the covered merchandise; (4) require importers of covered merchandise to post cash deposits and assess duties on the merchandise; and/or (5) take additional enforcement as appropriate, including referring the matter to ICE for civil or criminal investigation.

Q 19: Can parties to an investigation seek administrative review of CBP evasion determinations?

Yes. The interim regulations provide a 30-business-day period after a determination for parties to request an administrative review from CBP's Office of Regulations and Rulings (OR&R). OR&R will review CBP's initial determination de novo, meaning that it will afford no deference to the earlier determination.

Q 20: Can parties to an investigation seek judicial review of a CBP administrative review?

Yes. The final administrative determination is subject to judicial review by the Court of International Trade (CIT). The CIT will review CBP evasion determinations under an arbitrary and capricious standard -- a narrow standard that is more difficult to satisfy than the de novo standard used in CBP's administrative reviews.

Q 21: Will information submitted to CBP be provided to other federal agencies?

Generally not. The interim regulations state that federal agencies that request an evasion investigation will not receive documents filed by interested parties in the investigation. However, the interim regulations also provide that when a referral is made to DOC for a scope determination, the referral may contain any necessary information available to CBP regarding whether the merchandise described in an evasion allegation is subject to an AD/CVD order. The interim regulations do not specify whether this includes business confidential information.

Q 22: Can an evasion proceeding lead to other investigations or penalty actions?

Yes. Other CBP offices, such as ICE, may initiate investigations leading to civil or criminal penalties.

Q 23: What is the complete timeline for an evasion investigation?

The interim regulations require CBP to take certain actions within specified timeframes. The chart below outlines this process.

For more information, please contact one of the following authors:

Daniel Patrick Wendt, dwendt@milchev.com, 202-626-5898

Richard A. Mojica, rmojica@milchev.com, 202-626-1571

Austen Walsh*

Claire Rickard Palmer**

*Former Miller & Chevalier attorney
**Former Miller & Chevalier consultant

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