Customs, industry have numerous tools to halt evasion via third countries
June 19, 2012 — In the wake of affirmative preliminary antidumping (AD) and countervailing duty (CVD) determinations by the Department of Commerce, some Chinese solar cell and panel exporters are reportedly planning to evade lawfully owed AD and CVD duties of up to 250 percent, according to the Coalition for American Solar Manufacturing (CASM). Any attempt to evade the AD/CVD orders will not be effective, could be illegal and may expose U.S. importers, in addition to Chinese exporters, to liability under U.S. law, including significant financial penalties and criminal prosecution, according to CASM.
Commerce and Customs Actions to Date
U.S. Customs and Border Protection (CBP) has begun collecting cash deposits or bonds to secure estimated AD and CVD duties on imports of solar cells and modules from China, based on the affirmative preliminary determinations by Commerce in the AD and CVD investigations of Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled into Modules, from the People's Republic of China. AD duties at rates up to 249.96 percent and CVD duties at rates up to 4.73 percent currently apply to all Chinese solar cells and modules that entered the United States, respectively, on or after Feb. 25, 2012, or Dec. 27, 2011. Certain Chinese producers/exporters ("separate rate companies") are subject to an AD duty rate of 31 percent. All other Chinese exporters are subject to the 249.96 percent rate. Chinese imports from Dec. 27 through Feb. 26, are subject to CVD duties only. Chinese imports starting Feb. 27 are subject to both AD and CVD duties.
By law, the U.S. importer of record is responsible for posting AD and CVD duties. The exporter may not reimburse these duties. If an exporter reimburses the U.S. importer, the amount of duties owed by the importer will double. The actual amounts of duties that will be owed on Chinese solar cells and modules will not be known until the first administrative reviews of the orders are completed – long after the goods have been imported. If the final duty amounts increase, as they often do, the importer will be responsible for paying the difference, plus interest.
Illegal Circumvention and Evasion of AD/CVD Orders
The U.S. trade laws give Commerce important tools to combat circumvention and evasion of AD and CVD orders. Circumvention and evasion generally involve an exporter and/or importer intentionally seeking to avoid the lawful application of duties, whether by transshipping merchandise through a third country, assembling the merchandise in the United States or a third country or a variety of other means.
Simply transshipping merchandise through a third country does not change the product's country of origin. Similarly, AD and CVD orders apply to subject merchandise that undergoes minor or insignificant operations to assemble or complete them in a third country or in the United States. For example, toll production of cells in a third country (such as Taiwan), where Chinese producers send wafers and other raw materials to be processed into cells, should not change a solar cell's country of origin. Toll production in a third country has already been identified by Chinese producers as a means of attempting to evade AD/CVD duties, according to CASM.
Inclusion of Circumventing Products Under AD and CVD Orders
If Chinese producers/exporters, or U.S. importers, attempt to circumvent the AD or CVD orders, the domestic industry can and will request that Commerce determine that the circumventing producers are covered by the order. Commerce has used this power in multiple cases to include goods that were circumventing an order by, for example, minor assembly operations conducted in a third country.
Required Certifications for Importers/Exporters
Commerce has determined that an importer of solar panels/modules that it claims do not contain Chinese-origin cells must complete and maintain a certification to that effect. Importers preparing false certifications can be subject to severe penalties, including criminal prosecution. If the exporter of the modules is located in China, then both the U.S. importer and the Chinese exporter are required to maintain certifications. CBP can demand that certifications and records relating to them be produced at any time.
Failure to maintain the required certification or to substantiate the claim that the panels/modules do not contain Chinese cells will result in suspension of all unliquidated entries for which the requirements were not met. This mandate means that the importer will be required to post a cash deposit or bond on the entries equal to the China-wide rate for AD duties – approximately 250 percent of the entered value – and the all-others rate (currently 3.61 percent) for CVD duties.
CBP will actively and aggressively enforce the AD/CVD orders on solar cells and modules from China, including the collection of duties between the preliminary and final determinations in the cases.
Severe Penalties Apply for Evasion or Circumvention of the AD/CVD Orders
U.S. law imposes severe penalties on foreign producers and U.S. importers that seek to evade an AD or CVD order. Penalties can be imposed for making false statements on import documentation or for falsely marking or identifying imported merchandise. Parties attempting to evade lawfully owed duties also can be criminally prosecuted.
By law, all importers are required to exercise "reasonable care" in entering, classifying and determining the value of imported merchandise. Importers must provide any other information needed by CBP to properly assess AD/CVD duties, including accurately describing and classifying imports of Chinese solar cells or modules. Importers can be subject to civil and/or criminal penalties for failing to use reasonable care.
Pursuant to 19 U.S.C. § 1592, CBP can impose penalties for fraud, gross negligence and ordinary negligence. Importers that make false statements to avoid paying AD or CVD duties can be liable for civil penalties equal to or exceeding the commercial value of the merchandise in addition to the underpaid or unpaid duties. Importers also may be subject to civil and/or criminal penalties under 18 U.S.C. § 371 for "conspiracy to commit offense or to defraud the United States" or under 18 U.S.C. § 1001 for generally making false statements. CBP also can refer circumvention and evasion cases to the U.S. Attorney's Office for criminal prosecution. Further, CBP is authorized to apply an additional duty where goods or containers are marked with the incorrect country of origin or no country of origin.
Potential Broader Scope for the Orders
Importers and purchasers should also understand that the scope of the AD and CVD cases has not been finally determined. The scope currently covers solar modules, laminates and panels made with Chinese-origin cells, regardless of country of assembly, but it does not cover laminates and modules assembled in China from third-country-origin cells.
Broader than Commerce's preliminary scope, the domestic industry's scope definition would cover all solar laminates and modules assembled in China from third-country-origin cells. If Commerce agrees, solar modules assembled in China from cells produced in Taiwan, Canada or any other country will be subject to AD and CVD duties. Commerce will not issue its final determinations on this issue until Oct. 9, 2012. Any scope clarification would apply to all unliquidated imports starting from Feb. 25, 2012.
Current and Future AD and CVD Margins Likely to Increase
Finally, importers and purchasers should bear in mind that the AD and CVD margins applying to goods currently entering the United States are likely to be higher, perhaps substantially so. Current AD margins were calculated on goods entered between March and September 2011, but Chinese manufacturers continued to reduce cell and module prices in the U.S. market after September 2011. Commerce will review entries after September 2011, and importers will be liable for duties owed on the entire calculated margins, including any increase. Similarly, Commerce is still investigating and discovering numerous Chinese subsidy programs, which will likely cause CVD margins to increase for the final determination and in future reviews.