Customs Reauthorization Summary: Investigations of AD/CVD Evasion, IPR Enforcement

(NOTE: This is part two of a four part summary of customs reauthorization. See 1602170074 for part one. International Trade Today will publish summaries of other parts of the new law in the coming days.)

Title III – Intellectual Property Rights Enforcement

Title III of the Trade Facilitation and Trade Enforcement Act of 2015 includes measures for strengthening enforcement of intellectual property rights for imported products. Provisions of the law expand enforcement of copyrights and circumvention devices, including through information sharing and enforcement of pending copyright applications.

Sharing of samples with rightsholders (Sec. 302). The law gives CBP the legal authority to share information, including unredacted packaging and samples, with copyright and trademark holders when it suspects products are being are being imported in violation of their intellectual property rights. A final rule CBP issued in September had only provided for information sharing related to suspected trademark infringement (see 1509170022). The copyright information sharing provisions also apply to circumvention devices. CBP may only share information if the trademark or copyright has been recorded with the agency.

Seizure of circumvention devices (sec. 303). CBP will also be able to seize circumvention devices prohibited for importation under 17 USC 1201. When it seizes circumvention devices, CBP will have to notify the copyright holder potentially injured by the seized circumvention device within 30 days, provided the copyright holder is on a list maintained by CBP. CBP will issue regulations within a year to create the list.

Enforcement when copyright pending (Sec. 304). By August, the Department of Homeland Security will have to develop a process to enforce copyrights for which the owner has submitted an application for registration with the U.S. Copyright Office at the same level as if the copyright holder were already registered, including sharing of unredacted samples.

Other provisions. The law legally establishes the National Intellectual Property Rights Coordination Center (Sec. 305), which has been operating since 2008 (see 08071420). It also mandates that CBP and Immigration and Customs Enforcement include certain IPR enforcement information in the biennial strategic plans required by section 105 of the customs reauthorization legislation (Sec. 306), and requires sufficient staffing at CBP, ICE and the IPR center to ensure effective prevention of infringing imports (Sec. 307). CBP will also have to ensure sufficient training of their officers in IPR enforcement, and must issue regulations setting procedures for accepting equipment donations and training from the private sector (Sec. 308). Finally, the law requires international cooperation in IPR enforcement (Sec. 309), a report on IPR enforcement to Congress (Sec. 310), and education of travelers on the consequences of bringing infringing products into the country.

Title IV – AD/CVD Enforcement (‘Enforce and Protect Act of 2015’)

Title IV of the Trade Facilitation and Trade Enforcement Act of 2015 addresses antidumping and countervailing duty evasion. It includes a compromise version of the ENFORCE and PROTECT Acts included in the Senate and House bills, respectively, creating a new process for CBP to investigate allegations of evasion. It also creates a new Trade Remedy Enforcement Division to accept allegations and issue evasion-related Trade Alerts.

Trade Remedy Law Enforcement Division (Sec. 411)

The new Trade Remedy Law Enforcement Division within CBP’s Office of International Trade will coordinate and develop policies related to enforcement of antidumping and countervailing duties, including policies for enhanced bonding, and issue Trade Alerts directing a closer inspection of merchandise by port personnel. The division would also serve as the primary point of contact for allegations under the Enforce and Protect Act’s provisions for AD/CVD evasion investigations.

‘Enforce and Protect Act’ Sets Deadlines for CBP Evasion Investigations

Under the Enforce and Protect Act provisions of the Trade Facilitation and Trade Enforcement Act of 2015, government agencies (including the Commerce Department and International Trade Commission), foreign and domestic manufacturers of a product subject to antidumping or countervailing duties, or a trade union or association representative of the industry, may file allegations of AD/CVD evasion with CBP’s Trade Remedy Law Enforcement Division. The law defines evasion as entering “covered merchandise” by means of any “data or information, written or oral statement, or act that is material and false, or any omission that is material,” that results in the AD/CV duties being reduced or not applied.

Clerical errors exempt. Clerical errors are not considered “evasion” under the law,” unless part of a “pattern of negligent conduct.” The “mere nonintentional repetition” by an electronic system of an initial clerical error is not a “pattern of negligent conduct.”

Investigation timeline. CBP is required to follow a strict timeline for completing its evasion investigation, as follows:

• Initiation. CBP is required to initiate an investigation after 15 days if the allegation “reasonably suggests” evasion.
• Interim measures. No later than 90 days after initiation, CBP must decide if there is a “reasonable suspicion” of evasion. If there is, CBP will suspend liquidation of merchandise covered by the investigation beginning on that date.
• Final determination. CBP is required to make its final determination of evasion within 300 days of initiation, though it may extend the deadline by 60 days if necessary. If CBP finds evasion in its final determination, it will suspend liquidation (if not already suspended) and require cash deposits.

Questionnaires. CBP may issue questionnaires to collect additional information from the party that filed the original allegation, the party alleged to have evaded duties, the foreign producer or exporter of the merchandise covered by the investigation, or the government of the country from which the covered merchandise was exported.

Adverse inference. If any of these parties (except for foreign governments) fail to cooperate by “not acting to the best” of their ability to comply with the questionnaire, CBP may make an “adverse inference” by selecting information that may harm the interests of that party. For example, CBP may take the allegations at face value if the alleged evader does not respond.

Effect of finding evasion. If CBP finds evasion in the investigation, it will require cash deposits at the rate applicable to the producer or exporter of the merchandise. If the producer or exporter is unknown, the cash deposit rate will be the highest rate applicable to any producer or exporter of the product, including the all others rate (or country-wide rate if from China or Vietnam).

Appeal to CBP. Within 30 days of CBP’s final determination, the party found to be evading duties or the party making the allegations may file an administrative appeal of the determination. The appeal must be decided within 60 days.

Judicial review at CIT. After pursuing the administrative appeal, parties may file suit at the Court of International Trade within 30 days after the appeal is decided to challenge the decision.

Bond Option Eliminated for New Shippers (Sec. 433)

The new law eliminates the current option for importers of merchandise subject to AD/CV duties from a “new shipper” currently under review to post a bond rather than pay a cash deposit of estimated duties. Concerns have long persisted that the bond option acts as an enabler for duty evasion because importers may disappear after posting bond, making it difficult for CBP to collect the full amount of duties owed if the exporter ends up getting a high rate (see 11052734). Commerce ended the bond option in AD/CVD investigations in 2011 (see 11100305).

Other Provisions Address Information Sharing, Foreign Cooperation

Other AD/CVD enforcement provisions include authorization for CBP to issue questionnaires in connection with investigations of AD/CVD evasion, and apply adverse inferences when faced with a lack of cooperation (Sec. 412). The law allows CBP to obtain confidential business information from Commerce and the International Trade Commission when investigating negligence and gross negligence, rather than just fraud (Sec. 413). Other provisions require CBP to enter into bilateral agreements with other countries that concentrate on preventing evasion (Sec. 414), and add such bilateral agreements as a negotiating objective in current and future free trade agreements (Sec. 415). CBP will be required to allocate and train sufficient personal to prevent evasion (Sec. 431). Finally, the law directs CBP to file an annual report with Congress on steps taken to prevent and investigate AD/CVD evasion.