U.S. Customs hikes bonds for products subject to antidumping probes
U.S. Customs and Border Protection, under pressure from Congress for not collecting about $130 million in unfair trade penalties in fiscal 2003, announced new guidelines on Friday establishing higher bond levels for agriculture and aquaculture products to help the agency recover duties if an importer defaults on its duties.
Customs said it was tightening its continuous bond requirements for antidumping cases by determining the bond amount based on a company’s potential liability using the value of imports for the previous year. The agency has had difficulty collecting the full duty amounts owed in antidumping cases involving garlic, honey, shrimp and other types of agriculture products.
These measures “will put us in a far better position so that we will be able to collect a much greater percentage than we have in the last two to three years,” Customs Commissioner Robert Bonner said during a briefing with reporters in his office.
Regular importers typically pre-file a continuous transaction bond with Customs that provides umbrella coverage for all normal customs entries during a given year. The bond is set at 10 percent of the importer’s annual estimated duties, taxes and fees.
Dumping occurs when a foreign producer sells products for less than normal market value in the home or export market or less than the cost of production and shipping. The U.S. Department of Commerce can slap antidumping duties on such imports to raise their cost and take away any unfair advantage over U.S. producers. Final antidumping tariff rates can be much higher than the temporary rates the department sets at the start of its lengthy investigations. Importers have to pay the difference between their initial cash deposits to cover the estimated tariff amount and the final amount but, many times, companies go out of business, cannot afford a huge duty or fraudulently evade the duty. This leaves Customs to recover a fraction of the final duty amount by filing a claim with the insurance company that issued the performance bond.
Many importers qualify for the $50,000 bond minimum, but antidumping duties can range in the hundreds of thousands of dollars.
“That doesn’t cut it,” Bonner said.
Under the new formula, port directors will multiply the preliminary antidumping margin set by Commerce for a particular product and the value of the merchandise an importer brought into the country during the previous 12 months to more accurately reflect the potential liability.
If an importer, for example, has imported agriculture/aquaculture merchandise subject to the antidumping case with a value of $1 million and the antidumping rate is 40 percent, the importer’s continuous bond amount will be increased by $400,000.
New importers with no prior history will have their bond levels set using an estimate of their annual import value.
The new bond requirements amount to a “catastrophic insurance policy” giving Customs a “last recourse” to recover revenue if single entry bonds and direct claims on importers aren’t sufficient, said Stephen Hilsen, lead trade analyst in Customs’ Office of Strategic Trade.
In the directive to the ports, Customs said it would periodically review the bond amounts to make sure they are sufficient and recalculate bond amounts as necessary. The agency said it would change the formula for determining bond levels for other commodities if it determines a similar default risk. Nearly $100 million of the $130 million in uncollected duties last year was related to agriculture and aquaculture imports from China. Aquaculture products include farm-raised shrimp and crawfish.
“We are not ruling out monitoring other kinds of products where we think there is a genuine risk to our revenues,” Bonner said.
The new bond requirements come days after Commerce established preliminary antidumping taxes for frozen and canned shrimp from China and Vietnam.
Last month Bonner assured a House subcommittee he was ready to take steps to make sure bonds are set at the right level. A couple of congressmen criticized Customs for not moving faster to recalculate minimum bond levels and implement other measures to enforce antidumping duties.
In the roundtable with reporters, Bonner acknowledged the new measures are “not the panacea,” but said the agency is also taking steps to tighten enforcement of duty fraud. He also reiterated that Customs is working with the Treasury Department, which certifies insurance companies to operate, to make sure they are adequately capitalized to pay off their bonds after a large insurance company went out of business in the last couple of years.
Bonner suggested importers review their bonds for sufficiency in light of the guidelines.