Duty Collection in Flux
July 12, 2011-- Furniture Today,
WASHINGTON - The U.S. Department of Commerce is proposing a change in the way it instructs U.S. Customs and Border Protection to collect retroactive duties on goods that enter the United States from foreign producers that escape annual administrative reviews of their factories.
Such a change would affect the furniture industry because duties continue to be imposed on Chinesemade wooden bedroom furniture.
It also could make it more difficult for companies to receive a lower retroactive duty rate by simply paying cash settlements. In the wood bedroom case, exporters have paid such cash settlements to legal counsel representing domestic producers in order to be exempted from review and thus lock in a lower duty rate.
In antidumping cases, the DOC imposes what's called a cash deposit rate for companies that are part of the investigation or review. Importers of record pay these duties on shipments each year based on the percentage duty rate assigned to a given factory.
Later, an annual administrative review determines whether a given factory receives the same duty imposed in the cash deposit rate or whether it should be paying a higher or lower duty rate. If the duty rate is determined to be higher at the end of the review, the importer of record has to pay the difference between the new rate and the initial cash deposit rate.
In past reviews, the DOC has instructed Customs to collect duties on goods shipped by non-reviewed companies that are based on the initial cash deposit rate. For many furniture exporters, this rate has stayed around 7.24%.
Now, the DOC wants the rule to be more consistent with how it handles ME or market economy cases. China is an NME, or non-market economy. That rule says that Customs should collect duties based on a higher, "country wide" rate, which in the wooden bedroom furniture case is 216%.
A factory that believes it warrants a lower duty now will have to participate in the review process and file an application that requests a separate rate.
If a factory does not participate in the review, Customs would be instructed to collect the duties at the 216% rate, which could prove quite expensive for the importers of record that must pay the duties.
In the furniture case, cash settlements have been a way for the Chinese factories to avoid the higher retroactive duties. While importers of record don't like the nature of such agreements, they have privately said they provide a level of security against high retroactive duties.
The DOC has consistently declined to comment on the cash settlement deals. However, the new policy could make such agreements unworkable if it requires all factories to participate in the review if they wish to have a lower duty.
Taking part in a review each year could cost the Chinese factory or importer of record additional time and money, including costs of legal representation.
What effect this proposed change would have on each factory's individual rate and future cash deposit rate is unclear. The DOC said it mainly aims to ensure that each factory pays the appropriate rate for goods it ships to the U.S. market.
"The department's proposed refinement of its practice is intended to prevent non-reviewed exporters in NME (non-market economy) cases from benefiting from the rates of other exporters," the DOC said in a June 10 Federal Register announcement of the proposed change.
"This refinement will increase the need for interested parties (including exporters and importers of merchandise produced in NME countries) to participate in the department's proceedings," the Federal Register notice continued. "...Exporters and importers of subject merchandise produced in NME countries will need to determine whether to request an administrative review and file a separate rate application. Through an administrative review, a party can seek a separate cash deposit rate for its merchandise."
The DOC is accepting comments on this proposed change until July 11. All comments must be submitted through the Federal eRulemaking Portal at http://www.regulations.gov.
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