Anti-Dumping & Countervailing Duties Fraud

Anti-dumping and countervailing duties are taxes that the U.S. government places on importers when they suspect a company is selling products under fair market value. This allows domestic manufacturers to compete with low cost goods shipped in from other countries, especially China.

Members of the World Trade Organization (WTO) must report government subsidies given to domestic manufacturers. However, since China joined the WTO, they have not complied. This causes tension for those who trade with China, including the U.S. Members of the WTO complain about China’s lack of transparency, giving their companies an advantage as they overproduce goods and dump them into the global market.

As of February 2019, the U.S. government has been investigating anti-dumping and countervailing fraud activities in steel imported from China, Canada and Mexico. The Commerce Department alleges 44 Canadian subsidy programs, 26 Chinese subsidy programs, and 19 Mexican subsidy programs for steel production, ultimately hurting the U.S. steel industry. These are just some of the many ongoing investigations.

The Tariff Act of 1930, also referred to as the Smoot-Hawley Tariff Act, gave the legal justification to place duties on imports to protect businesses and industries in the United States. The law addresses both anti-dumping and countervailing; under Smoot-Hawley, the presence of the following conditions allow for the imposition of anti-dumping or countervailing duties:

• The country of origin must be a member of the WTO, subject to agreements about subsidies.
• Products imported from one of the WTO member countries must “materially injure” or present a threat to the associated industry in the United States.
• A government commission will investigate WTO members and foreign companies who attempt to engage in unfair trade practices by flooding the market with low cost goods

The U.S. calculates anti-dumping duties at the company level, with the intention of bridging the gap between low foreign manufacturer prices and a higher fair market value. The U.S. determines countervailing duties at a government level; the duties typically match the government subsidy, tax break, or assistance to equalize the cost of imported goods with domestic goods in the United States.

The U.S. government has implemented other protectionist policies besides tariffs to protect U.S. companies from those who try to sell goods below fair market value in the United States. Import quotas are one of those policies. Some administrations have set a maximum number for units allowed to enter the U.S. market. In the 1980s, the Reagan administration implemented a quota on the import of Japanese automobiles, and an international Multifiber Agreement set quotas for the textile industry during the last quarter of the 20th century. Non-tariff requirements also make dumping products in the U.S. market more difficult. For example, requiring companies to put a “Made in XXXXX” label on their goods.

The False Claims Act (FCA) provides protection and offers benefits for whistleblowers, and those who commit fraud against the government face penalties under this federal law. FCA serves as the federal government’s strongest tool to fight fraudsters who cost taxpayers billions of dollars each year. Further, in regard to illegal trade activity, fraudsters hurt entire industries.

FCA provides a qui tam provision, allowing whistleblowers to file a lawsuit against those who commit pricing fraud on behalf of the government. When customs fraud occurs during international trade, current and former employees have valuable information for qui tam cases that can help hold companies who commit fraudulent practices accountable.

Choosing to speak out about anti-dumping and countervailing duties fraud requires courage, which whistleblower laws reward with protection and compensation. Under the FCA, a whistleblower can report corporate fraud and have their identity sealed during the government’s investigation into the allegations. Federal laws also protect whistleblowers from retaliation; those companies who terminate whistleblowers are required to reinstate employees, give them double back pay plus interest, and compensate them for attorney fees. Finally, the FCA compensates whistle blowers for up to 30 percent of any monies recovered by the government in a qui tam case.