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New Regulation Tackles EAPA “Covered Merchandise Referrals”

In recent months, new and modified Department of Commerce regulations impacting antidumping (AD) and countervailing duty (CVD) proceedings have taken effect. These changes, which are intended “to strengthen and improve the administration and enforcement of the AD/CVD laws,” will have a significant impact on participants in AD/CVD proceedings.

Under “Cover”

  • New regulation (19 C.F.R. § 351.227), effective November 4, 2021, addresses procedures for the Department of Commerce’s consideration of “covered merchandise referrals” from U.S. Customs and Border Protection (CBP) pursuant to investigations under the Enforce and Protect Act of 201 (EAPA).
  • EAPA is the process for CBP to conduct civil administrative investigations of potential evasion of antidumping and countervailing duty (AD/CVD) orders. Investigations are initiated on the basis of an allegation by an interested party or referral by another Federal agency.
  • If CBP is unable to determine whether the merchandise is “covered merchandise” within the scope of an AD/CVD order, it will refer the matter to Commerce to make a covered merchandise determination. CBP’s EAPA investigation will be stayed pending completion of Commerce’s inquiry.

What to Know

  • Given the potential for significant overlap between a covered merchandise inquiry and scope or anti-circumvention inquiries (which are governed by separate regulations), the new regulation is crafted to mirror these corresponding provisions (i.e., § 351.225 and § 351.226), with some exceptions.
  • The new regulation requires that Commerce initiate an action within 20 days of receiving a referral from CBP (compared to 30 days for scope or circumvention inquiries). If a separate scope or circumvention inquiry is already underway, Commerce may address the referral in that ongoing inquiry, rather than a separate covered merchandise inquiry.
  • The appropriate analysis in covered merchandise inquiry is made on a case-by-case basis; Commerce may rely either on the scope analysis or the circumvention criteria in making its determination.
  • Commerce’s determination must be made within 120 days subject to a 150-day extension for “good cause.” The total of 270 days is shorter than scope and anti-circumvention inquiries, which may take up to 365 days.
  • Commerce’s covered merchandise determination will apply to all products from the same country with the same physical characteristics regardless of the producer, exporter, or importer.
  • When a covered merchandise inquiry is initiated, Commerce notifies CBP of the initiation and directs CBP to continue the suspension of liquidation of products subject to the inquiry at the cash deposit rate that would be applicable if the product was found to be within the scope of the order. If there is an affirmative determination, Commerce will direct CBP to (1) continue the suspension of liquidation and apply cash deposits for previously suspended entries, and (2) begin the suspension of liquidation and require cash deposits for all other unliquidated entries of the product at issue.

How We Can Help

CBP is leveraging the EAPA to target various industries based on a suspicion of evasion by aggressively scrutinizing imports potentially covered by an AD/CVD order. Companies that navigate in this space must ensure the origin, classification, and value claims on imports are accurate and properly documented to defend against the increasingly high risk of CBP action through this enforcement mechanism. Arent Fox can help “walk” executives through EAPA investigations and any related “covered merchandise referrals” to Commerce to protect against this high-risk exposure.


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