Last summer the U.S. Congress passed the ENFORCE Act. The ENFORCE Act provides a path for U.S. companies to ask for investigations of foreign products (and the importer of record) when a question arises as to evasion of duties through misrepresentation of the product/source country, etc. Last week Wheatland Tube became the first company to file a complaint under the ENFORCE Act. The specific details of the complaint are not yet public other than what was provided in the Wheatland Tube press release (circumvention of duties on pipe used in the solar industry).
Steel Market Update has requested more information about the filing but to date has not received anything new. We have reached out to Wheatland’s attorney, Roger Schagrin and we reached out to trade attorney Lewis Leibowitz as we try to understand the process further. We have received a response to our inquiry from Mr. Leibowitz who told us:
I am very concerned that the structure of the ENFORCE Act will put pressure on importers to get out of the business of importing merchandise covered by AD/CVD orders. That was probably the aim of the petitioners and their counsel who lobbied for this legislation.
The structure of the legislation is the basic problem. Customs is a law enforcement agency in part–they deal with many criminal or quasi-criminal matters including fraud, misdescription of imported goods, under-valuation, misclassification, etc. Throughout history, private parties have been able to go to Customs and reveal information about misconduct. Customs accepts the information and conducts (or not) investigations.
One of the critical things about our democracy is that law enforcement has too much to do. The public regularly complains that miscreants are not prosecuted because law enforcement does not have the resources. They complain that certain kinds of Customs violations are under-enforced. The petitioners in AD/CVD cases have badgered Congress for years about this, although they can point to no evidence of misconduct going unaddressed. Customs tried to defend their record but ran into a political buzz-saw.
A private party that wants to stop imports can now present allegations to Customs of “duty evasion” and FORCE Customs to investigate it. Further, Customs must report the results of the investigation to the accusing party (e.g., Wheatland). If they decline to find “evasion” then the accusing party gets a second bite at the apple in the form of a Customs “administrative review” (not to be confused with a proceeding by the same name conducted by the Commerce Department in AD/CVD cases).
Win or lose, the accusing party can bring the accused party to its knees financially by forcing one (or maybe two) Customs investigations, which will run up legal fees in the hundreds of thousands of dollars (maybe a lot more). This kind of financial leverage should not be placed in private hands, especially the hands of competitors in the market place.
You suggested that Customs is out of its league here. I don’t think that’s a problem. Under the Tariff Act, Customs is responsible for investigating alleged fraud, gross negligence and simple negligence. The extra burden on Customs is revealed by the requirement that they disclose the results of the investigation to a private party or parties making the allegation.
Thus far, Customs has decided not to share confidential information collected in the investigation with the accusing party. Lobbyists for petitioners are actively trying to change that and have an “administrative protective order” provision that would allow counsel for accusing parties to see all the confidential information. If Customs were required to do that, many accused parties would simply not play the game.
That would be a huge setback for fairness.
I hope I’ve explained my misgivings about this. I think it’s a mistake and that the problem it purports to address has not been shown to be as widespread as its proponents make out.
If you would like to speak directly to Lewis Leibowitz he can be reached by phone at: 202-250-1551 or by email at: Lewis.Leibowtiz@lellawoffice.com
John PackardRead more from John Packard
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