Posts Tagged ‘Countervailing Duty’


 

How Bombardier may Avoid Anti-Dumping and Countervailing Duties

It was announced earlier this week that Bombardier, a Canadian rail and air transport manufacture and AirBus, an aeronautics maker from France, have struck a deal which will avoid the U.S. anti-dumping and countervailing duties that were to be imposed on them upon importation.

 

How are some companies able to avoid these duties while others are not?

The Background

In 2016 Bombardier landed a contract to sell 75 of their C-Series jets to Delta Airlines in the U.S. In a move that was considered to be protectionist, U.S. air plane manufacture Boeing argued that Bombardier was able to sell their jets to Delta at low cost due to Canadian government subsidies. This complaint was heard by the U.S. Commerce Department which ruled in agreement with Boeing. The result was an almost 300% combined countervailing and anti-dumping duty to be placed against Bombardier C-Series jets upon importation into the U.S.

What are Anti-Dumping and Countervailing Duties?

In our previous post The Potential Perils of Anti-Dumping and Countervailing Duties, we explain anti-dumping and countervailing duties. In a nutshell, the intent of anti-dumping is to protect domestic industry through a government imposed increased duty on foreign imports and importers that it believes are priced below fair market value, and below what they would normally sell the goods from in their own domestic market.

 

Countervailing, is an import tax imposed on certain importers, and importers that may receive subsidies from their country which allows them to sell the goods for under market value in the U.S. Market. Countervailing is also referred to as anti-subsidy duties.

Why Were the C-Series Jets Considered to be Unfairly Subsidized?

The Government of Quebec’s has a 49.5% interest in the C-Series jets. Additionally, the Canadian Government  provided a $344-million dollar loan to Bombardier when sales for the jet were lagging.

How Will Bombardier Possibly Avoid Paying Anti-Dumping and Countervailing Duties?

As mentioned above, anti-dumping and countervailing duties are imposed on foreign importers. If the company manufactures goods within the U.S., they are no longer foreign nor would there be an import.

 

Bombardier partnered with Airbus on the C-series jet recently, which effectively provided a 50.01% interest to Airbus. The C-series jet will not be manufactured in Canada, but on a secondary Bombardier assembly line at the U.S. Airbus facility. Therefore any sales into the U.S. would not be considered foreign and import duties not applicable.

What’s Next?

It is too soon to tell if this move by Bombardier and Airbus will indeed successfully avoid countervailing and anti-dumping duties. In some cases where an importer avoids anti-dumping and countervailing duties by moving manufacturing they could still face these duties and taxes on the parts they import. It is expected that there will be research into this deal and subsequent comment for the U.S. Commerce Department in weeks to come.

Which view do you take on this story? Has the U.S. unfairly penalized Bombardier or has Canada unfairly subsidized them? Please leave a comment below.

 

 

The Potential Perils Of Anti-Dumping And Countervailing Duties

Antidumping and Countervailing Duties

 

As an importer of foreign goods coming into the commerce of the United States, you already know how complicated the import formalities can be, and there is always more to learn. One subject that may not have appeared on your radar is that of trade laws such as anti-dumping (AD) and countervailing duty (CVD).

 

What is Dumping?

Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer’s sales price in the country of origin, or at a price that is lower than the cost of production.

 

What are Countervailing Duties?

Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. Countervailing duties are assessed to counter the effects of the subsidies provided by foreign government to merchandise that is exported to the United States. These subsidies cause the price of such merchandise to be artificially low.

 

Measures of Protection for U.S. Industry

If a U.S. industry believes that it is being injured by unfair competition through dumping or subsidization of a foreign product, it may request the imposition of antidumping or countervailing duties by filing a petition with both Enforcement and Compliance and the United States International Trade Commission. Enforcement and Compliance investigates foreign producers and governments to determine whether dumping or subsidization has occurred and calculates the amount of dumping or subsidies.

According to the United States International Trade Administration, there are hundreds of antidumping cases for 44 US trading partner countries, including but not limited to countries as diverse as Argentina, Canada, Italy, China, Malaysia and Ukraine.  There are more active AD cases for goods manufactured in China than from any other country.

Products affected range from ironing boards to wooden bedroom furniture to ball bearings to engineered wood flooring, solar panels and cells; from honey to salmon, from shrimp to pasta to mushrooms. New cases are initiated frequently, while other cases are terminated.  AD rates can range from less than 1% to over 250% of the import value of the goods.

 

Customs Entry Requirements

With all antidumping cases, there are additional formalities and documentation that is required to be presented with the customs entry, no matter the AD rate. U.S. Customs and Border Protection will require that the customs entry include documentation certifying that you, the importer, are not being reimbursed by the manufacturer for the cost of the antidumping duties. Because AD cases are assigned based on information provided by the manufacturer to the ITA, and different firms may receive either higher or lower AD rates, it is important that you provide the full legal name and address of the actual manufacturer and the exporter, in order to ensure that the correct AD case is associated with your entry.

 

Customs Bond Underwriter Requirements

Due to the very high risks that U.S. customs approved bond underwriters assume when writing these required bonds, they are very likely to require that importers affected by antidumping regulations provide 100% collateral at the time of their bond application or roll-over. They will also require that the importer provide full financial information at that time. Providing collateral involves transferring either a certified check or a letter of credit, generally equal to 1-2 years of the importer’s continuous transaction bond. These funds or release of the letter of credit will be held by surety in order to protect them should there be an increase in Antidumping Duties (ADD) liability, and will not be returned to the importer until at least 180 days after the final entry has liquidated.  Many years can pass before an Antidumping case is closed, thus permitting liquidation of the entries.

Note: Depending on the importer’s history, volume and value of imports, the surety may require further collateral at any time.

 

Recommendations for Importers of New Products

You may well imagine that being unaware of a potential AD case on your product, discovering that your goods are subject to an unplanned additional duty can come as quite a shock, not to mention a tremendous expense.

Pacific Customs Brokers recommends that you contact your customs broker or attorney prior to making purchasing decisions for goods that are new to your firm.  Our Trade Advisory team can assist you with research on the dutiability of the product and advise on eligibility for reduced or duty free treatments, in addition to determining whether it may be subject to Antidumping duties.

 

Understanding Antidumping or Countervailing Duties

To learn more about Antidumping or Countervailing duties attend an upcoming H.S. Tariff Classification Workshop.

 

What are your thoughts on Antidumping? Are your products impacted by these duties? Please share in our comments section below.