New Importer, Old Baggage - Successor Liability For Antidumping & Countervailing Duties

• Published date: 09 February 2022
• Subject Matter: Corporate/Commercial Law, International Law, M&A/Private Equity, Compliance, Corporate and Company Law, International Trade & Investment
• Law Firm: Braumiller Law Group, PLLC
• Author: Mr Harold R. Jackson

Imagine your company imports from a vendor in Vietnam and sells them at a competitive margin in the U.S. Business is so-so until the Department of Commerce conducts an Antidumping or Countervailing Duty ("AD/CVD") review that encompasses your company or its foreign vendor and determines the origin of your goods to be China, which causes you to owe backlogged AD/CVD at rates over 100% ad valorem for the past year. Your company simply cannot afford this even after switching vendors. It sounds like a good idea to dissolve the company entirely and start from scratch, right? - Wait.

Many companies overlook successor liability for importers because the concept is not found in the statutes, regulations, or Customs and Border Protection ("CBP") guidance. Caselaw has primarily shaped the development of successor liability in this arena. Although companies are generally not liable to the creditors of their predecessors, CBP can impose successor liability in several instances.¹

The two scenarios where successor liability is most prevalent are (1) in the case of a merger or acquisition, and (2) in the case where owners of an importing company dissolve the company and form a new importing company with the same operations. In both instances, the new or acquired company will be liable for the AD/CVD of the former or acquired company.

What Liability Carries Over? - AD/CVD, Evasion & Civil Penalties

CBP is determined to find successor liability for unpaid AD/CVD, as well as penalties and other Customs obligations arising from those owed duties. In addition to the unpaid AD/CVD, the liability that carries over to the new company includes civil penalties for AD/CVD declarations, bonding requirements, and exposure to interim and final measures in evasion investigations.

• Unpaid AD/CVD - Enforcement of AD/CVD is a priority issue for CBP. In 2019 alone, CBP conducted over 81 audits of imports of AD/CVD goods and identified $20.3 million in unpaid duties. Liability for these unpaid duties can carry over to the new company.
• Bond Requirements - CBP is authorized to require a Single Transaction Bond ("STB") or cash payment in lieu of a continuous bond if CBP has a reasonable belief that a continuous bond would place the revenue in jeopardy in relation to AD/CVD. CBP may allow the importer to use a continuous bond only after CBP determines that the importer is in compliance with AD/CVD requirements. This is a powerful tool that CBP frequently uses to prevent entry of AD/CVD...