US Commerce Department is fast-tracking major duty evasion rules

Sweeping changes to US trade enforcement regulations are underway, and the Commerce Department appears to be intent on finalizing them with little or no public input.

The proposed rules, part of the Trump administration’s efforts to tighten trade enforcement, aim to clamp down on duty evasion in antidumping and antisubsidy proceedings by targeting abuses involving anticircumvention inquiries, scope rulings and new shipper reviews. The rules are regarded as the most significant set of trade enforcement proposals since a 1996 overhaul of trade enforcement rules.

Commerce released the proposed rules on Aug. 13 and allowed a 30-day period for the public to comment — a timeline that troubled some practitioners representing importers and foreign companies who will be significantly affected by the changes. Some firms pushed for an extension of the deadline.

The proposal “was released without warning, in the middle of August, and in the midst of a global pandemic,” law firm Mowry & Grimson wrote in an Aug. 26 comment.

During the 1996 rulemaking, Commerce gave the public 78 days to comment.

“The current deadline ... deprives parties of the ability to submit comprehensive comments as required by the Administrative Procedures Act,” which governs the regulation-making process, law firm Husch Blackwell said in an Aug. 28 comment.

In a notice today, Commerce said it is keeping the Sept. 14 deadline for public comments, while extending the time to reply to those comments to Sept. 28. “Commerce agrees that the public and the agency would benefit if parties have the opportunity to submit rebuttal comments in response to comments filed by other parties on the proposed rule,” today’s notice said.

Commerce also announced that it will now only accept comments submitted online and those that don’t require confidential treatment.

As of this afternoon, only four public comments — all calling for an extension — were posted on the federal government's regulation website.

In1996, Commerce amended antidumping and antisubsidy duty regulations to reflect the agreements struck during the Uruguay Round negotiations that later led to the creation of the World Trade Organization.

Practitioners say that at that time, the department set a 62-day deadline and extended it for another 16 days, and also held a public hearing as part of the rulemaking process.

Proposed regulation

If Commerce adopts the proposed set of rules, it would require foreign exporters and producers to provide more information on their so-called “bona fide" sales before the department starts a new shipper review. This is a way for companies to exempt their merchandise from antidumping duties by proving that they are not affiliated with other firms subject to the levies.

Commerce says foreign companies have been abusing new shipper reviews to avoid import duties.

The department would separate scope and circumvention proceedings and change the procedures for each.

In circumvention inquiries, Commerce would have specific timelines to impose duties when it finds attempts to avoid levies. It would also have “explicit” authority to self-initiate an inquiry without a petition from a US industry or companies. The department could also apply circumvention determinations on a country-wide basis rather than in a company-specific manner.

In scope proceedings, Commerce would “codify and clarify” its analysis of “mixed-media” products — merchandise with components that may be subject to an import duty. Examples of such products include door thresholds that contain aluminum parts, toolboxes with nails and screws and solar panels with aluminum extrusions.

The rules would codify Commerce’s longstanding “substantial transformation” test to determine the country of origin of the products in scope proceedings.

For both scope and circumvention measures, the department would also be able to retroactively impose duties on unliquidated imports — those that haven't gotten their total tally of import fees and duties — going as far back as the preliminary determination date in the original investigation.