As with most questions in the Trade Compliance space, the answer to this question can be nuanced and significantly impact an importer’s compliance risk, and the landed cost of the goods.
Antidumping and countervailing duties can be substantial, often over 100% of the value of the goods. They can significantly impact a product’s profitability. In addition, US Customs and Border Protection (CBP) has identified AD/CVD as a Priority Trade Issue. In FY 2021, CBP levied monetary penalties totaling over $43 million for AD/CVD evasion that included fraud, gross negligence, and negligence.
To confirm whether or not products are subject to AD/CVD, let’s start by defining each term:
Dumping occurs when foreign manufacturers sell their goods in the United States at a price lower than the cost of production or below the manufacturer’s sale price in the country of production. Dumping results in unfair competition and can potentially put domestic producers out of business when they cannot compete.
To prevent dumping, the U.S. government has imposed antidumping duties on certain goods to ‘level the playing field’ for domestic producers by aligning the cost of the imported goods with fair market value.
Countervailing is similar to Antidumping, except that Countervailing Duties (CVD) are imposed when a foreign government provides assistance or subsidies to local exporting manufacturers that enable them to sell their goods in the U.S at a price lower than domestic manufacturers.
How do we know if a product is subject to AD/CVD?
Antidumping and Countervailing duties cover a wide variety of products, including truck tires, nails, solar panels, pasta, bedroom furniture, and aluminum extrusions. The list of products covered by AD/CVD orders is continually updated, so it is important to review new products you intend to import, as well as products you regularly import. The International Trade Administration and the Department of Commerce websites provide a list of products currently subject to AD/CVD orders.
- Step 1: Gather Product and Sourcing Details – At the beginning of the evaluative stage, when determining if AD/CVD applies, it’s important to gather and understand the origin of the product, as well as the form, fit, and function of the product to make an educated determination. Missing or omitted product details can inhibit an accurate determination.
- Step 2: Confirm the Correct HTS Classification - While not dispositive, the first step in any AD/CVD review is to confirm the correct HTS Classification of your imported product. AD/CVD orders include the Harmonized Tariff Schedule (HTS) classification for goods subject to the scope of the orders, so the HTS can be used to guide an investigation of whether or not AD/CVD applies. However, this information is only provided for convenience and customs purposes.
- Step 3: Review Products based on AD/CVD Scope Orders – Unfortunately, AD/CVD orders are not limited to the classifications listed within. Rather, the AD/CVD orders contain a narrative description that defines the merchandise covered by the orders and can sometimes be much more precise in technical requirements than the HTS classification. Merchandise falling within this description are “in-scope”. This means that even if your product’s classification does not ‘flag’ for AD/CVD, it may still be found in-scope and subject to AD/CVD.
Determining whether your product is subject to AD/CVD can be complicated. If you need assistance navigating your way through HTS Classification requirements or AD/CVD scope descriptions and exclusions, Tradewin is here to help.