Trade Remedies: "New Shipper" Reviews

Trade Remedies: “New Shipper” Reviews
Vivian C. Jones
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
Some U.S. producers of merchandise subject to antidumping (AD) duties or
countervailing duties (CVD) complain that U.S. Customs and Border Protection (CBP)
have not collected the full amount of duties owed on targeted imports. One of the
“loopholes” often cited is a law that allows importers that receive goods from new
exporters of targeted merchandise to post bonds instead of cash deposits while an
investigation of the “new shipper” is conducted to assess an appropriate AD or CVD
duty amount based on the exporter’s previous sales.
Congress suspended the new shipper bonding privilege from April 1, 2006 to June
30, 2009 (sec. 1632(a) of P.L. 109-280). A May 2008 report by the U.S. Government
Accountability Office (GAO) estimated that abuse of the new shipper bonding privilege
was responsible for about 40% of the uncollected duties from fiscal years 2001 to 2007.
This report will be updated as events warrant.
Background
U.S. antidumping (AD) laws (19 U.S.C. 1673 et seq.) authorize the imposition of
remedial duties if (1) the International Trade Administration (ITA) of the Department of
Commerce determines that foreign merchandise is being sold, or is likely to be sold, in
the United States at less than fair value, and (2) the U.S. International Trade Commission
(ITC) determines that an industry in the United States is materially injured or threatened
with material injury, or that the establishment of an industry is materially retarded, due
to imports of that merchandise. A similar statute (19 U.S.C. 1671 et seq.) authorizes the
imposition of countervailing duties (CVD) if the ITA finds that the government or any
public entity of a foreign country has provided a prohibited subsidy on the manufacture,
production, or export of the merchandise, and the ITC determines injury. These laws are
part of a larger body of statutes also known as trade remedies. In the United States, AD
and CVD actions represent the vast majority of activity under the trade remedy laws.

From FY2001 to FY2007, duties assessed on entries of goods subject to AD and
CVD orders¹ were distributed to the petitioners and other parties in support of successful
AD and CVD cases pursuant to the Continued Dumping and Subsidy Offset Act
(CDSOA), more commonly known as the “Byrd Amendment.” Although the CDSOA
was actually repealed as of October 1, 2005, in sec. 7601of the Deficit Reduction Act of
2005 (P.L. 109-171), the repeal language provided for continued disbursement of AD/CV
duties assessed on entries of goods until October 1, 2007. CDSOA disbursements
amounted to $284 million in FY2004, $226.1 million in FY2005, and $380.0 million in
FY2006, and $264.4 million in FY2007.²
Duty Collection Issues
U.S. Customs and Border Protection (CBP) reportedly has had considerable
difficulty collecting the actual amount of AD and CV duties owed on subject
merchandise. This problem received special attention beginning in FY2001, the first year
in which U.S. industries were eligible to receive disbursements under the CDSOA.
According to CBP records, uncollected duties from FY2001 through FY2007 amounted
to more than $613 million.³ For example, Louisiana crawfish producers estimated, and
CBP’s annual disbursement reports later confirmed, that between FY2002 and FY2004,
CBP collected only $25.5 million of about $195.5 million in AD duties owed on⁴
crawfish. A recent report by the Government Accountability Office (GAO) estimated
that the ability of “new shippers” to temporarily post bonds (in lieu of cash deposits)
while the ITA conducts an investigation of their sales in the U.S. market accounted for
about 40% of these uncollected duties.⁵
Any shortfall in collections of AD or CV duties affects U.S. producers of the subject
merchandise in two ways: (1) the protection afforded by the AD or CV action, intended
to assist the domestic industry to compete against unfairly traded, lower-priced goods, is
diminished; and (2) domestic producers are not able to collect all of the duties available
to them under the CDSOA.⁶ In addition, with the repeal of CDSOA, duties that would

¹ After the ITA and ITC reach final affirmative determinations of dumping or subsidy, ITA
instructs CBP in an AD or CVD “order” to assess these duties on the targeted merchandise.
² 19 U.S.C. 1675c, repealed by section 7601 of P.L. 109-171. The repeal means that, for all
entries of goods after October 1, 2007, AD/CVD duties are, as they were prior to the CDSOA
enactment, deposited in the general account of the U.S. Treasury.
³ Government Accountability Office (GAO). Antidumping and Countervailing Duties: Congress
and Agencies Should Take Additional Steps to Reduce Substantial Shortfalls in Duty Collection.
GAO-08-381, March 2008, p. 13. (Hereinafter, GAO report).
⁴ Prior to FY2001, all AD and CV duties were deposited in the general fund of the U.S. Treasury.
CBP has included a listing of all uncollected duty amounts by case number in its CDSOA annual
reports since FY2003. See [http://www.cbp.gov/]. The requirement that CBP report the amount
of AD/CVD duties collected (and uncollected duties) was, in effect, repealed with the CDSOA..
⁵ GAO report, p. 24.
⁶ Because the United States uses a retrospective system of AD/CVD collection, some industries
are still receiving disbursements for goods that entered the United States prior to October 2007.

normally be directed to the U.S. Treasury (i.e., on targeted merchandise entering after
October 2007), are foregone.
“New Shipper” Reviews
In the course of an AD or CVD investigation by the ITA, the agency generally
determines a separate “weighted average” dumping margin or subsidy rate for each
exporter or producer of subject merchandise that was investigated individually during the
period of investigation (POI), and an estimated (generally much higher) “all-others rate”
for all those not individually investigated.⁷ These are the duty rates assessed if the
investigation results in final affirmative determinations by the ITA and ITC, and an AD
or CV duty order is subsequently issued.
Since most exporters who are individually investigated are likely to receive
significantly lower rates than the “all-others rate,” it is often in the interest of an exporter
to request an investigation so that it can be assigned a separate rate. After the conclusion
of an AD or CVD proceeding, if the ITA receives a request from an exporter or producer
who (1) did not export the subject merchandise during the initial POI, and (2) is not
affiliated with any producer or exporter who exported the merchandise, the ITA must
conduct a review to establish an individual AD or CV duty rate for the exporter.⁸ This
type of review, commonly known as a “new shipper review,” may take from 270 to 450
days to complete, depending on complexity.⁹
Prior to April 2006, any importer purchasing from the new shipper undergoing
investigation received the right, at his or her option, to post a bond or security (in lieu of
a cash deposit) to cover the additional AD or CV duties to be assessed at the completion¹⁰
of the review. Congress suspended this “new shipper bonding privilege” until June 30,
2009 (sec. 1632(a) of P.L . 109-280). As a result, all importers must now post a cash
deposit to cover the estimated AD or CV duties. In terms of collecting the duties owed,
this eliminates the risk of delinquency provided that the final duty rate assessed is equal
to (or less than) the cash deposit rate. However, if the ultimate duty rate is higher than
the cash deposit posted, a risk that the difference is uncollected remains.¹¹

⁷ 19 U.S.C. 1673d(c)(1)(B); 19 U.S.C. 1671d(c)(1)(B). The ITA can also determine instead a
single estimated country-wide subsidy rate if it determines that it is not practicable to determine
individual rates. See 19 U.S.C. 1671d(c)(1)(B)(i)(II); 19 U.S.C. 1677f-1(e)(2)(B).
⁸ 19 U.S.C. 1675(a)(2)(B). A firm from a non-market economy (NME) country, such as China,
must also demonstrate the absence of de jure and de facto government control over its export
activities in order to be assigned a separate rate in AD investigation; similar restrictions apply
to new shippers from NME countries (19 U.S.C. 1675(a)(2)(B)(iv)).
⁹ 19 U.S.C. 1675(a)(2)(B)(iv).
¹⁰ 19 U.S.C. 1675(a)(2)(B)(iii). The bond amount set by CBP was generally significantly lower
than the amount of duties likely to be assessed.
¹¹ GAO Report p. 25.

Alleged Abuse of New Shipper Rules
Many U.S. producers of goods subject to AD or CVD orders cited the new shipper
bonding privilege as one of the ways that importers circumvented the duties owed. One
method that was reported involved exporters subject to high AD duty rates setting up
“shell” companies in the source country to act as new shippers. Other such companies
were set up in the United States to act as the importer of record, or arrangements were
made with other collusive importers. These “new shippers” exported a minimal amount
of the goods at a “fair” price and subsequently requested that the ITA undertake a new
shipper review of its export sales price.¹² While the new shipper review was underway,
the importer posted a bond — generally for a substantially lesser amount than the AD/CV
duty amount that was assessed at the end of the investigation.¹³
Administrative authorities sometimes discover this or other types of fraudulent
arrangements in the course of the new shipper review. If not discovered, however, the
“new entity” can receive a very low dumping margin and continue to supply the market
with the original shipper’s merchandise at a much lower AD/CV duty rate than previously
assigned. Even if the arrangement was discovered, the receiving company can succeed
in importing unlimited quantities of the subject merchandise for many months.¹⁴
Second, since the United States uses a retrospective system of assessing AD/CVD
tariffs, the time between the actual entry of the merchandise and receipt of the final bill
assessing the duties is 3.3 years on average, which can add to the risk that duties are
uncollected, especially when dealing with illegitimate importers.¹⁵ During the elapsed
time, the shipper, the importer, or both, may have gone out of business or have declared
bankruptcy. Therefore, in many cases, the higher duties owed remain uncollected.
ITA and CBP Efforts
The ITA and CBP have both made significant policy changes in an effort to restrict
abuses of the new shipper bonding privilege and other forms of duty circumvention. In
procedures implemented in October 2002, the ITA began requiring additional
certifications and qualifying paperwork from all exporters requesting new shipper reviews
in order to (1) ensure that these exporters actually meet all regulatory requirements and
(2) limit the application of the bonding privilege so that the new shipper under review¹⁶
could not become a conduit for exports from producers not involved in the review.

¹² U.S. Congress. House. Committee on Ways and Means. Hearing. “United States-China
Relations and China’s Role in the Global Economy.” October 30-31, 2003. Statement of the
Customs Bond Committee of the American Surety Association (ASA).
¹³ WTO, Negotiating Group on Rules, United States. “New Shipper Reviews (ADA Article 9.5),”
July 14, 2004. No. TN/RL/GEN/11.
¹⁴ Ibid., p. 2.
¹⁵ GAO Report, p. 23.
¹⁶ The ITA began requiring these additional certifications in Preserved Mushrooms from
Indonesia: Initiation of New Shipper Antidumping Duty Review, 67 FR 62437. For further
clarification, see U.S. Department of Commerce, International Trade Administration, Import
(continued...)

In July 2004, CBP required that continuous bond amounts for all importers of certain
“special categories” of merchandise subject to AD or CV duty orders (currently only
frozen warmwater shrimp¹⁷) be increased to the ITA rate established on the final AD or
CV order (new shippers are assessed at the “all others” rate), multiplied by the value of
the importer’s entries of the subject merchandise in the previous 12-month period. For
example, if an importer has imported subject merchandise with a value of $1 million
during the previous 12 months, and the ITA rate is 40 percent, the importer’s continuous
bond amount will be increased by $400,000.¹⁸ Continuous bonds must be posted in
addition to any regular duties, single-entry bonds, or cash deposits required to cover each
entry of the merchandise. Bond amounts will also be periodically reviewed to monitor
whether the bonds are sufficient, and rates may be adjusted as circumstances warrant.¹⁹
On April 24, 2006, Thailand requested dispute settlement consultations with the
United States in the World Trade Organization (WTO) relating to certain AD procedures,
including CBP’s continuous bond requirement, on warmwater shrimp.²⁰ India, Japan,
Brazil, and China requested to join the consultations in early May 2006. In early June
2006, India also requested consultations on the continuous bond requirement.²¹ A
February 2008 WTO dispute settlement panel report found that application of the revised
policy with respect to products from India and Thailand was inconsistent with U.S. WTO
obligations.²² In addition, the U.S. Court of International Trade has issued a court
injunction on implementation of the policy against some importers.²³
Legislation
The “new shipper” measure included in P.L. 109-280 suspended the availability of
bonds to importers from new shippers retroactively from April 1, 2006, to June 30, 2009,
thus requiring them to submit a cash deposit to cover the entire estimated AD/CV duties

¹⁶ (...continued)
Administration Policy Bulletin No. 03.2 of March 4, 2003, Combination Rates in New Shipper
Reviews. [http://www.ita.doc.gov].
¹⁷ GAO estimated that 87% of the uncollected duties were owed on agriculture/aquaculture
products (see GAO Report, p. 15).
¹⁸ Ibid.
¹⁹ Customs Directive 99-3510-004.
²⁰ World Trade Organization. United States — Antidumping Measures on Shrimp from Thailand.
April 27, 2006, WT/DS343/1. See 71 F.R. 33495 for a summary of the major issues raised by
Thailand.
²¹ World Trade Organization. United States — Customs Bond Directive for Merchandise Subject
to Anti-Dumping/Countervailing Duties, WT/DS345/R (See 71 F.R. 44723 for a summary of the
major issues raised by India); United States —Measures Relating to Shrimp from Thailand,
WT/DS343/R.
²² Ibid.
²³ National Fisheries Institute, Inc. v. United States Customs and Border Protection . 465 F.Supp.

2d at 1337. The injunction applies to 27 members of the above trade association.

for entries of the targeted merchandise.²⁴ The measure was implemented by CBP on
August 16, 2006.²⁵ The law further requires the Secretary of the Treasury, in consultation
with the Secretary of Commerce, the U.S. Trade Representative, and the Secretary of
Homeland Security to report to Congress on the effectiveness and trade-related impact
of the suspension and to make recommendations on its extension no later than December
31, 2008. The same officials were also required to report on previous duty collection
issues during the “4 most recent fiscal years for which data are available; including any
fraudulent activity intended to avoid payment of duties” within 180 days of enactment.²⁶
Conclusion
Suspension of the new shipper bonding privilege may partially improve the
effectiveness of AD and CV duty collections because, until July 2009, importers must
post cash deposits roughly equivalent to the amount of duties assessed at the time of entry
into the United States, provided the final amount of duties assessed is equal to or lesser
than the deposit rate. Supplemental duties that may be accrued due to possible rate
increases (either during the final ITA determination as a result of annual reviews) are not
protected, however.²⁷ Furthermore, Congress faces the issue, some time in 2009, of
evaluating its effectiveness and determining whether to allow it to lapse, extend the
suspension, or require cash deposits for new shippers permanently.
Congress could also revise the level (or number) of shipments necessary for²⁸
exporters to apply for “new shipper” status. According to ITA officials, abusers of the
privilege typically exported one shipment of the goods subject to AD or CV duties at a
relatively high price, resulting in a relatively low cash (or no) deposit being required. If
subsequent shipments were found to be dumped or subsidized, CBP had to issue²⁹
retrospective bills for the duty amounts assessed which were likely to be uncollected.
Therefore, Congress could choose to increase the dollar amount or number of shipments
required prior to application for a new shipper review, or to provide ITA with the
discretion to do so. On the other hand, this approach could unfairly burden legitimate new
shippers by requiring them to export a much larger amount at a relatively high rate of duty
prior to receiving an individual (presumably lower) rate.
Finally, the requirement that CBP report all uncollected AD/CV duties was repealed
along with the CDSOA. Congress may also want to consider reinstating the reporting
requirement.

²⁴ The suspension does not apply to Mexico or Canada because the North American Free Trade
Agreement (NAFTA) specifies that any amendments to AD or CVD laws apply to NAFTA
countries only “to the extent specified in the amendment.” See 19 U.S.C. 3438.
²⁵ U.S. Customs and Border Protection. Suspension of New Shipper Review Provision.
Memorandum, August 16, 2006.
²⁶ P.L. 109-280, sec. 1632(b) and (c).
²⁷ GAO Report, p. 25.
²⁸ GAO Report, p. 42.
²⁹ Ibid.