Now, More than Ever, Be Wary of and Responsive to a CBP Form 28!

U.S. Customs and Border Protection (“CBP”), having previously identified AD/CVD evasion as priority trade issue, is ramping up its efforts to further combat AD/CVD evasion. Effective August 22, 2016, interested parties can, in addition to pursuing either a civil False Claims Act/Qui Tam Action or a criminal trade violation, now report Enforce and Protect Act (“EAPA”) violations using CBP’s e-Allegation mechanism. 

Who is an Interested Party?

Interested parties qualified to use this violation reporting mechanism include:

• Foreign manufacturers, producers, exporters, or importers of covered merchandise or a trade or business association a majority of the members of which are producers, exporters, or importers of such merchandise
• Manufacturers, producers, exporters, or importers in the U.S. of a domestic like product 
• A certified union or recognized union group of workers that is representative of an industry engaged in the manufacture, production or wholesale of a domestic like product in the U.S. 
• A trade or business association a majority of the members of which manufacture, produce, or wholesale a domestic like product in the U.S. 
• If covered merchandise is a processed agricultural product, a coalition or trade union that is representative of processors, processors and producers, or processors and growers

What Information Will be Made Public?

While interested parties who use the e-Allegation mechanism to report violations can designate certain business information as confidential, the EAPA requires public disclosure of:

 • The name of the party reporting an EAPA violation
• The reporting party’s standing to submit an allegation
• The name and address of the importer alleged to be evading an AD/CVD order

What’s New Under EAPA?

Under the interim rule, CBP is, for the first time, required to investigate reports of alleged violations and to keep the party making the allegation informed. CBP must initiate an investigation within 15 business days of the submission of an e-Allegation containing information that reasonably suggests a violation of the EAPA. CBP may use any method to investigate an e-Allegation including, for example, a CBP Form 28 (also known as a Request for Information), questionnaires and, where appropriate, adverse inferences.

Why Should I be Extra Wary of a CBP Form 28 Now?

Importers should be extremely cautious of any Request for Information (CBP Form 28) received in connection with transactions that may have AD/CVD implications. If an importer is unsure whether its merchandise comes within the scope an AD/CVD order, now’s the time to be proactive and request a Scope Ruling from the Department of Commerce. If you receive a CBP Form 28 and believe you violated Customs law in any way, you still have the opportunity to file a timely prior disclosure with Customs. In either case, ensure that you communicate with a Customs expert the minute you receive the CBP Form 28 to evaluate your options and determine whether, without your realizing it, you are under an EAPA investigation. The taking of the correct proactive measures at this point in the process can potentially save you substantial time and money in the long run!

What Actions and Timeframe Does CBP Act in?

If, within 90 calendar days of an investigation’s initiation, CBP reasonably suspects that scope-sensitive merchandise is being evasively entered, the EAPA authorizes the taking of interim measures. Interim measures can include:

• Suspending the liquidation of unliquidated entries relating to merchandise entered after the date of initiation
• Extending the period for liquidating unliquidated entries relating to merchandise entered before the date of initiation
• Requiring a single transaction bond, the posting of a cash deposit, and/or the reliquidation of entries

Where analysis of allegations submitted reveals the existence of substantial evidence of a violation, CBP will make an affirmative determination of evasion within 300 calendar days of an investigation’s initiation. Upon making an affirmative determination of evasion, CBP will:

• Suspend the liquidation of unliquidated entries relating to merchandise coming within the scope of the determination
• Extend the period for liquidating unliquidated entries relating to merchandise that comes within the scope of the determination and which was entered before the date of initiation
• Require importers of merchandise coming within the scope of the determination to post a cash deposit
• Assess duties on all merchandise coming within the scope of a determination
• Refer the matter to ICE for civil or criminal investigation

Upon completion of an investigation, CBP must, within 5 business days, notify the interested party of its determination. An interested party can, within 30 business days of the issuance of a negative initial determination, submit same for administrative review. Unlike other whistle blowing mechanisms - for example qui tam actions or those set forth in the anti-fraud regulations of the SEC or IRS - the EAPA’s e-Allegation mechanism does not confer any monetary benefit or reward of attorney’s fees on a prevailing interested party and/or its counsel.

Conclusion

The increased level of attention paid to the issue of unfair trade practices – as evident in the uptick of both AD/CVD duties and enforcement activity – provides a strong incentive for evasion. Though evasion can have many forms, the most common expressions encountered in connection with AD/CVD orders include misrepresenting the country of origin, presenting false shipping/entry documentation, and/or misreporting the physical characteristics of merchandise. The new AD/CVD reporting function in the e-Allegation reporting system will make it easier for competitors and other interested parties to present information regarding potentially fraudulent transactions and cause importers to exercise a heightened degree of pre-compliance diligence. It will, at the same time, also require importers to be more vigilant – and, if need be, proactive - than ever with regard to the receipt of any CBP Request for Information (CBP Form 28).