Anti-dumping duties: retroactive application and suspended verification

Intro

Furthermore, the European Commission believes it can impose regulations that 'repairs' a previously invalid regulation with retroactive effect. Whether this is actually permissible remains unclear. We will examine both situations below.

Registration of imports and avoidance of anti-dumping duty

Although the case law of the Court of Justice on the retroactive application of an anti-dumping duty is quite old, there is still much uncertainty 'in the market'. This is unjustified, as the Court of Justice provided a clear judgement on June 6, 2013, in the Paltrade EOOD case (C-667/11). What was the case about?

On January 31, 2011, Paltrade EOOD (hereinafter "Paltrade") made a customs declaration for wood screws and self-tapping screws that were shipped from Malaysia. The screws are products for which a definitive anti-dumping duty was imposed under Regulation (EC) No. 91/2009, originating from China. At the time the screws were imported from Malaysia, there was only an investigation going on (initiated under Regulation (EU) No. 966/2010) into possible avoidance of the imposed anti-dumping duty by imports from Malaysia. Although no (provisional) anti-dumping duty had been imposed yet, the registration of this import was already mandatory.

Point 18 of the regulation stipulated that if avoidance was found, an appropriate anti-dumping duty could be imposed retroactively. As you might expect, the anti-dumping duty was indeed extended to products shipped from Malaysia. The screws, imported by Paltrade EOOD, fell under the anti-dumping duty. The regulation included a requirement for the registration of the import of these screws.

However, the Bulgarian authorities did not keep a separate registration of the imported goods and did not use the additional TARIC code that was specified in the regulation. The Bulgarian authorities then issued a decision for the recovery of the anti-dumping duty. Paltrade appealed this decision, and the Bulgarian court (the court where Paltrade appealed), referred prejudicial questions.

Court of Justice (C-667/11) – Prejudicial questions

The Bulgarian court asked the Court of Justice whether, without the additional registration, anti-dumping duty could be imposed retroactively and what rate would apply. The Court of Justice, as usual, considered the observations submitted by the Bulgarian government and customs authority, as well as those of the Spanish, Italian, and Hungarian governments and the Commission.

These parties primarily argued that if the customs authorities could determine the registered import using the national registration system, then the national registration system would suffice. The Court of Justice accepted this consideration and concluded that, in such a case, the anti-dumping duty could be imposed retroactively.

The rate applicable retroactively for these products is the rate that applied to 'all other companies', as specified in the regulation, namely 85%. A cost-increasing tax of 85% applied retroactively.

Invalid regulation, re-imposition of Anti-dumping duties

The imposition of an anti-dumping duty is done through a regulation. It sometimes happens that such a regulation turns out to be invalid. This is determined in a prejudicial procedure at the Court of Justice. If it turns out that the regulation is invalid, then there was no legal basis for imposing the anti-dumping duty. However, the European Commission has devised a way to remedy this by publishing a new regulation and subsequently determining that it applies retroactively from the moment the original duty was imposed. As we have seen, retroactive application is not prohibited, but the question is whether this approach is permissible. We will explain this further.

On July 3, 2019, the Court of Justice answered prejudicial questions from the Dutch Supreme Court in the Eurobolt case (C-644/17). The question was whether Implementing Regulation (EU) No. 723/2011 was valid. This regulation extended the already existing anti-dumping duty on certain fasteners from China, shipped from Malaysia. The Court of Justice ruled that this regulation was invalid, because it was in conflict with the basic anti-dumping Regulation (Regulation (EC) No. 1225/2009).

This meant that the anti-dumping duty on products from Malaysia was no longer due. However, the European Commission intervened. On August 26, 2019 – just a few weeks after the judgement – the European Commission published a regulation, reopening the investigation. The authorities were also instructed not to proceed with remission or refunding pending the results of the investigation.

Subsequently, on April 30, 2020, the European Commission published another regulation re-imposing the anti-dumping duty with retroactive effect to 2011. This regulation also stipulated that the authorities should definitely not proceed with refunds following the Eurobolt judgement. If any refunds had already been made, those amounts would need to be recovered, according to the regulation.

Implications for businesses

Returning to the situation described in the introduction. You were very pleased with the import process. You did not have to pay an anti-dumping duty because you sourced the goods from Indonesia rather than China.

After reading the above, you understand that you cannot rely too quickly on the fact that no anti-dumping duty is due. Especially if an investigation has been opened or a registration obligation applies. It is also important in this context that it sometimes turns out that – consciously or unconsciously – an incorrect product code was used when importing the goods. This initially meant that no anti-dumping duty applied, but later it did. Or the origin turns out to be incorrect. As an importer – or customs agent – you are at risk!

It is crucial for importers to research the potential expansion of countries for which anti-dumping duties apply to the import of certain products. This is also important for customs agents: if you file a declaration for a client and suddenly an anti-dumping duty is due retroactively.

Suspended verification

In the context of the imposition and recovery of anti-dumping duties, we also highlight the risk of suspended verification, especially for customs agents. Declarations are usually submitted by customs agents using direct representation. Any recovery claims are then pursued directly by Customs from the client.

However, direct representation offers a false sense of security for the representative. During the period when a declaration has the status of "suspended verification," the customs agent is liable for the potential customs debt through the guarantee that has been provided by the customs agent. This is not a specific risk that needs to be taken in account for anti-dumping duties, but this is a risk associated with the role of customs agent. When there is a provisional anti-dumping duty, Customs automatically suspends the declaration for verification. During this period, the customs agent stands as a guarantor for the customs debt. If the anti-dumping duty must be paid, Customs will, if necessary, pursue the customs agent.

This is obviously a typical "recipe for disaster" in the logistics chain. If a customs debt is booked and communicated only after several months, and if it is also substantial, the party actually responsible for payment may not be willing to pay voluntarily. Therefore, it is essential to address this in advance and to contractually define how to handle anti-dumping duties. Our advice is to exercise utmost care and to closely follow the legislation and announcements from the European Commission in this regard, so that the client is not faced with surprises. The client/importer should also be aware of potential risks and, at the first request of the customs agent, provide a guarantee for any anti-dumping duties that may be imposed, at least during the period of suspended verification.

Conclusion and further information

Importing goods from a country where no anti-dumping duty is imposed may seem appealing, but there are pitfalls. Research into potential future anti-dumping duties – including retroactive ones – is necessary!

If you have questions or comments about anti-dumping duties or related topics based on this article, please feel free to contact us. Customs Knowledge has extensive experience in the field of anti-dumping duties and would be happy to advise you.