March 25, 2014

Ready for a Surprise?

By Douglas J. Heffner and Richard P. Ferrin

The Aluminum Goods You are Importing From China May Be Subject to Additional Duties Ranging From 170 Percent to More Than 400 Percent 

Every week, we see companies that are surprised to find their imported aluminum products could be subject to the antidumping (AD) and countervailing (CVD) duty orders on aluminum extrusions from China (the Orders). If the goods are subject to the Orders, the result can be catastrophic: companies are required to pay the U.S. government additional AD and CVD duties ranging from 170 percent to more than 400 percent of the value of the imported good, plus potential penalties to U.S. Customs Border Protection (Customs).  

Why Am I Finding That My Imported Goods are Covered by the Orders Long After the Fact?

The reason for the surprise is that the scope of the Orders is extraordinarily vague, describing merchandise subject to the additional duties as follows:

The merchandise covered by this order is aluminum extrusions which are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by The Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents).

For most companies, imported goods have names and are categorized by the Harmonized Tariff System (HTS) codes upon importation.  Companies typically do not describe their products based on the good’s manufacturing process and the import compliance teams at most companies have no clue whether their imported good is produced using an extrusion process.  To compound the issue, when the Department of Commerce (Commerce) issued the Orders, it only listed a few of the HTS codes of the products covered by the Orders, with the disclaimer that while “HTS subheadings are provided for convenience and customs purposes, the written description of the scope of the order is dispositive.”  To further mask the problem, many imported aluminum products are significantly further manufactured (e.g., post extrusion machining), thereby obscuring the fact that the goods were originally extruded.  For example, Commerce considers an aluminum medical part that was produced on a CNC machine tool to be included within the scope if the aluminum bar that was used as feedstock was extruded.  The vagueness of the Orders, coupled with a deficient list of HTS codes for products covered by the Orders, has caused many importers to miss that their imported aluminum goods are covered by the Orders.

To make matters worse, Customs is asking importers, sometimes long after importation, whether their goods are subject to the Orders.  This results in the importer having to pay AD and CVD duties ranging from 170 percent to more than 400 percent.  In addition, many companies believe that their imported aluminum goods are exempted because they are finished goods (for which there is an exemption in the Orders).  Nevertheless, although importers may believe that their imported goods are finished goods that qualify for the exception, Commerce often has a much more restrictive view of what qualifies as an excluded finished good. 

How Can I Protect My Company From Significant AD/CVD Duties?

We have assisted many companies in determining whether their products are potentially within the scope of the Orders and have assisted some of our clients in obtaining scope exclusions from Commerce. In other instances, in order to reduce their potential liability for AD and CVD duties, we have advised our clients to participate in Commerce’s annual administrative reviews. In the first administrative review, this strategy reduced the overall amount of duties owed from over 400 percent to a combined AD/CVD duty rate of 43 percent.

Time is of the Essence

This coming May is the next opportunity for companies to request administrative reviews. If your company misses the end-of-the-month deadline, it will forgo the opportunity to potentially reduce the duties owed for another year. Therefore, the time to act to determine whether the imported aluminum products that your company imports from China are potentially subject to significant additional AD/CVD duties is now.

If you have any questions about whether your imported aluminum products are covered by the scope of the Orders, please contact Douglas Heffner or Richard Ferrin, or any other member of the Customs and International Trade Team.


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