M E R E D I T H C O V E Y D I R E C T O R , G L O B A L C U S T O M S C O M P L I A N C E W I L L I A M S - S O N O M A , I N C .

Anti-Dumping What You Need to Know and Why

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Feb 3-5, 2016 Houston, Texas

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M E R E D I T H C O V E Y D I R E C T O R , G L O B A L C U S T O M S C O M P L I A N C E W I L L I A M S - S O N O M A , I N C .

Anti-Dumping “Why It’s Bad for Business”

Part I – The Challenges

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DDeelleeoonn TTrraaddee,, LLLLCC

The Challenges

1.  Scope descriptions are dispositive……but subject to interpretation

2.  The duty paid at time of entry is at a preliminary rate…but final rate can be significantly higher, retroactive and payment of interest due on the difference

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Who’s Who

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DOC - Import Administration (IA)

IA enforces trade laws and agreements to prevent unfairly traded imports and to safeguard jobs and the competitive strength of American industry.

AD Role: Must find that imports are being dumped

Issues Scope Rulings

International Trade Commission (ITC)

ITC is an independent federal agency determining import injury to U.S. industries in antidumping…

AD Role:

Must find that dumped imports are causing or threatening injury to a domestic industry

Sends out questionnaires to US and Foreign Producers and US Importers

US Customs

CBP is responsible for collecting the Antidumping and Countervailing Duties (AD/CVD) in a timely manner. Priority Trade Issue Goals: To detect and deter circumvention of the AD/CVD law, to liquidate final duties timely and accurately, while at the same time facilitating legitimate trade.

SCOPE DESCRIPTIONS

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Wooden bedroom furniture (WBF) is generally, but not exclusively, designed, manufactured, and offered for sale in coordinated groups, or bedrooms, in which all of the individual pieces are of approximately the same style and approximately the same material and/or finish. Made substantially of wood. Made in China

1.  Wooden beds such as loft beds, bunk beds, and other beds. Cribs are excluded 2.  Wooden headboards for beds (whether stand-alone or attached to side rails), wooden

footboards for beds, wooden side rails for beds, and wooden canopies for beds 3.  Night tables, night stands, dressers, bureaus, mule chests, gentlemen's chests, bachelor's

chests, lingerie chests, wardrobes, vanities, chessers, chifforobes, and wardrobe-type cabinets;

4.  Chests-on-chests, highboys, lowboys, chests of drawers, chests, door chests, hutches and armoires

5.  Desks, computer stands, filing cabinets, book cases, or writing tables that are attached to or incorporated in the subject merchandise; and

6.  Other bedroom furniture consistent with the above list

“Although the HTSUS subheadings are provided for convenience and customs purposes our written description of the scope of this proceeding is dispositive”

WBF SCOPE DESCRIPTION *

* Excerpt from Federal Register /Vol. 69, No. 221 /Wednesday, November 17, 2004 PAGE 6

“…generally, but not exclusively, designed, manufactured, and offered for sale in coordinated groups, or bedrooms, in which all of the individual pieces are of approximately the same style and approximately the same material and/or finish. Made substantially of wood.”

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The Toy Box Story

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“… 4. Chests-on-chests, highboys, lowboys, chests of drawers, chests, door chests, hutches and armoires”

Chest as defined within the order: A chest is typically a case piece taller than it is wide featuring a series of drawers and with or without one or more doors for storing clothing. The piece can either include drawers or be designed as a large box incorporating a lid.

Chest as defined within the Order: “A chest is typically a case piece taller than it is wide featuring a series of drawers and with or without one or more doors for storing clothing. The piece can either include drawers or be designed as a large box incorporating a lid”

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Those seeking the ruling argue: The name toy box or chest clearly indicates that the item is designed and marketed to store toys.

Results of the scope ruling: “The scope of the Order makes no reference requiring that boxes or chests be used for any particular or defined purpose.” …”Therefore, Dorel’s wooden toy boxes or chests clearly meet the description of merchandise covered by the Order.”

Final Scope Ruling and Formal Scope Inquire Initiation: Dorel Asia, November 14, 2005

*

* Example only, not the toy box subject to the ruling.

Good news for Toy Boxes….but

Antidumping duties revoked on toy boxes Commerce excludes them from bedroom scope Thomas Russell, Staff -- Furniture Today, February 26, 2009

WASHINGTON — The U.S. Department of Commerce has withdrawn wooden toy boxes from the scope of its antidumping order on Chinese-made wooden bedroom furniture. The decision is in response to a Nov. 25 request from members of the American Furniture Manufacturers for the Committee for Legal Trade, who said they no longer saw a need to have wooden bedroom furniture duties apply to the toy boxes. A public comment period initiated following that request drew no responses, according to the DOC. The decision applies to wooden toy boxes imported from China since Jan. 1, 2007. Duties collected on these items will be refunded to importers of record who brought the items into the United States after that date.

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Toy Box Exclusion Facts

To be excluded the toy box must: (1) Be wider than it is tall; (2) have dimensions within 16 inches to 27 inches in height, 15 inches to 18 inches

in depth, and 21 inches to 30 inches in width; (3) have a hinged lid that encompasses the entire top of the box; (4) not incorporate any doors or drawers; (5) have slow-closing safety hinges; (6) have air vents; (7) have no locking mechanism; and (8) comply with American Society for Testing and

Materials (ASTM) standard F963-03.

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Final Results of Changed Circumstances Review and Determination to Revoke Order in Part 74 FR 8506 February 25, 2009

Made Substantially of wood

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“…generally, but not exclusively, designed, manufactured, and offered for sale in coordinated groups, or bedrooms, in which all of the individual pieces are of approximately the same style and approximately the same material and/or finish. Made substantially of wood.”

“The Metal Nightstand”

Nightstand Metal = 70% by weight Metal = visually predominant, (essential character) Classified as a metal nightstand * DOC’s ruling – published 2011 Subject to antidumping Clarified the meaning of ‘made substantially of wood’

* In a ruling issued by CBP July 10 2012 (N220860) a cocktail table with a metal frame, wooden table top and wooden bottom shelf, made in China as metal furniture citing GRI 3(b). Metal was predominant in weight and cost.

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“In a previous scope determination concerning the WBF Order, in determining whether or not furniture was “substantially made of wood,” the Department considered whether there was “extensive use of wood product in all of the essential structural components” of the product, and whether “the wood in this product was integral to its composition” to the extent that “if the wood were removed,” the furniture at issue would not exist. We have considered those question in this light of facts of this case and have simplified and clarified the analysis two questions:

PAGE 14 * University Loft December 13, 2011

1)  how extensive is the use of the wood products in

the composition of the furniture: and

2)  are the wood products in the furniture integral to is composition to the extent that if the wood products were removed, the resulting item is substantially different from the item when the wood products were still part of it?

Excerpt from the 2011 Scope Ruling for the Metal Nightstand

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1)  how extensive is the use of the wood

products in the composition of the furniture: and

2)  are the wood products in the furniture integral to is composition to the extent that if the wood products were removed, the resulting item is substantially different from the item when the wood products were still part of it?

…how far is too far?

Fictitious example

Candle Scope

In Scope: Candles which are made from

petroleum wax and contain fiber or paper-cored wicks. They are sold in the following shapes: tapers, spirals, and straight-sided dinner candles; rounds, columns, pillars; votives and various wax-filled containers

Out of Scope: (1984 – July 2011) Candles in the shape of identifiable objects or of a holiday specific design.

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PAGE 17

“When viewed from most angles, the Department is not able to identify the painted wick as a stem. In addition, the color and surface texture are not indicative of apples”

“With respect to the carrot bundle candle, the Department finds that the green leafy top is sufficiently indicative of the leafy stems of actual carrots. The carrot-bundle candle is identifiable as a bundle of carrots due to the orange color and the overall shape of the candle, which is wide at the top near the leafy stem, and narrows a bit at the base of the candle like an actual carrot.”

Candle Conundrums – “Vegetables v. Fruits”

Photo of a real apple Photo of the apple candles

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Photo of the carrot candle Photo of real carrots

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“The Department is not able to identify the silver, gold, or pearl color as roses, because roses are never silver or gold but commonly red and a variety of other color combinations”

“When viewed from the side and top angles these candles appear to be a snail, including characteristics commonly associated with snails, such as the shell and antennae.”

Candle Conundrums – “roses are red, snails are ?”

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“The Flat Bottom Duck Story”

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National Candle Association (“NCA” the domestic party) argues that “these candles are short pillar candles that fall specifically within the scope of the Order. Each candle has a flat bottom and ducks do not have flat bottoms. Therefore the subject candles are not identifiable objects”.

The DOC did not agree with NCA’s reasoning and they found these candles not subject to antidumping.

Photo of the duck candles Photo of short pillar candles

Updated Scope

In Scope: Candles which are made from

petroleum wax and contain fiber or paper-cored wicks. They are sold in the following shapes: tapers, spirals, and straight-sided dinner candles; rounds, columns, pillars; votives and various wax-filled containers

Out of Scope: (1984 – July 2011) Candles in the shape of identifiable objects or of a holiday specific design.

Out of Scope: (effective August 2011) Birthday (numeral) Utility (emergency & household emergency) Figurine (human, animal, or deity shaped)

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RETROACTIVE DUTY RATE INCREASE

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Preliminary Rates

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The United States uses a retrospective assessment system

•  Rates in effect at the time of entry are preliminary •  Final liability is determined after the merchandise is imported

How does this impact the importer?

•  Actual financial liability is not know at time of import •  If the importer is in Retail it will be difficult to set sales margins and ensure a profit

The Math

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Rateincreasesto216.01%August2007andisretroactivetoJune2004

Total Cost of 100 night stands Purchase price (PO cost) $20,000

ADD paid June 2004 $39,600 Additional ADD + Interest paid in 2007 $ 4,052

Total $63,652 To break even the night stands would have to be sold at $636.52 a piece

ADD now due for 200 night stands ($20,000 X 216.01%) $43,202 Less ADD deposited in June 2004 -$39,600 Additional ADD owed in 2007 for the 2004 shipments $ 3,602 Plus interest on the $3,602 that was not paid in 2004 $ 450 Total additional duty and interest owed in 2007 for the 2004 shipments $ 4,052

PO cost of 100 night stands shipped June 2004 @$200/each $20,000 ADD rate in effect June 2004 198% ADD deposited June 2004 $39,600

M E R E D I T H C O V E Y D I R E C T O R , G L O B A L C U S T O M S C O M P L I A N C E W I L L I A M S - S O N O M A , I N C .

Anti-Dumping

Part II – Importer Best Practices

•  Dealing with CBP on ADD •  How to navigate in and out of Scope •  Selling the Financial Risk Avoidance to Finance

TOMORROW

M E R E D I T H C O V E Y D I R E C T O R , G L O B A L C U S T O M S C O M P L I A N C E W I L L I A M S - S O N O M A , I N C . M C O V E Y @ W S G C . C O M

Thank you

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Feb 3-5, 2016 Houston, Texas

DDeelleeoonn TTrraaddee,, LLLLCC