January 14, 2019
China Antidumping Duties: Know Before You Owe
*This blog post features insights from a recent webinar hosted by Flexport’s Brenda Custer-Espeleta, VP of Customs Compliance, and Jayson Gispan, Director Customs Compliance. *
This is not intended to be financial or legal advice and should not be relied upon as such. You should consult your financial and legal advisors before making any financial or legal decisions about you or your business.
You’ve probably heard about the potential financial impact of the U.S.-China trade war tariffs (we cover it in our weekly Tariff Insider), but do you know how costly antidumping and countervailing duties can be? Some importers are finding themselves owing thousands of dollars in additional duties years after they’ve brought their goods into the U.S.
What are antidumping and countervailing duties?
Antidumping duties (ADD) are applied to goods that have been “dumped” into the U.S. market, sold at prices lower than what would be charged in the exporting country’s home market. Countervailing duties (CVD) are applied to goods that can be cheaply imported into the U.S. because the manufacturer was given a subsidy, usually by the government. These inexpensive goods flood the market, and aren’t competitive with U.S. businesses.
The government assesses ADD and CVD duties to offset the detrimental effects of these goods imported at less than fair market value on the U.S. economy – and they can become a costly responsibility for the importer.
How much could these duties cost you?
Here’s a hypothetical scenario to see how much you might have to owe in additional duties, if you import a product subject to antidumping:
Let’s assume you’re importing 10,000 widgets at a total value off $100,000, and the regular duty applied to these goods is 2%. You would owe $2,000 in import duties.
Let us also assume that this product is also subject to the China 301 tariffs, which could be raised to 25% on March 2nd, 2019. This would mean you would owe an additional $25,000. If your goods weren’t subject to antidumping, your products could be cleared at Customs upon entry into the U.S., and you would only pay $27,000 in duties.
However, let’s say these goods do have ADD applied to them, and Customs has estimated that the preliminary duty rate for this product subject to antidumping is 67%. Now you need to pay an additional $67,000 upon import, and you have to wait for a investigation to be final (which may take years) before the entry is liquidated by Customs and the final amount owed is calculated.
Now, let’s say that following the investigation, the final duty rate is determined to be 88%. Now, you also need to pay the difference of the preliminary 67% and the final 88% –which is an additional $21,000 – years after you’ve imported and sold the goods.
In total, this import into the U.S. cost you $115,000 in duties. As you can see, tariffs can be costly, but antidumping duties can be costlier (and unlike the tariffs, they won’t be postponed or lifted at the end of a trade war).
What can you do?
The best thing you can do to avoid being surprised with thousands of dollars in duties is to research all your products to find out if they have ADD or CVD applied to them, and to check in with your customs broker before you purchase anything.