Following the U.S. Department of Commerce’s recently announced withdrawal from the 2013 Suspension Agreement on Fresh Tomatoes from Mexico, growers, importers, and trade associations alike have turned their attention to this important topic.
To this end, I have been asked by several parties to discuss the effect of antidumping tariffs on consignment transactions and trade between Mexican growers and their affiliated U.S. importers. The primary question being: “How will antidumping tariffs be assessed and applied to non-f.o.b. transactions at the border”?
The short answer is that U.S. Customs and Border Protection will assess an antidumping duty upon the U.S. importer of record based on the entry value of the transaction/load that the importer identifies to Customs.
The catch is that the importer of record must identify an entry value that “closely approximates” the transaction value for sales to unrelated buyers in the U.S.
Simply put, it is easy to understand that Mexican exporters that ship tomatoes to a consignment agent, grower’s agent, customs broker, or an affiliated U.S. importer are merely transferring product into the U.S., but are not yet passing title to a buyer.
As such, it is appropriate for the Mexican exporter to utilize and apply a transfer pricing methodology to the product it exports. However, the affiliated U.S. importer does not have this luxury and must resist the urge to understate the entered value of Mexican tomatoes by adopting the exporter’s transfer price as the entered value.
Rather, the U.S. importer must identify an entry value that “closely approximates” the transaction value for sales to unrelated buyers in the U.S.
The penalties for an importer understating entry values range from being compelled to pay the unpaid tariffs plus interest on one hand to the imposition of civil or criminal fraud charges on the other.
Suffice it to say, the U.S. importer’s manipulation of entered values to reduce the cash deposits of estimated antidumping duties will not go unnoticed. Both Customs and Commerce are well versed in holding the importer’s feet to the fire in order to ensure the importer’s payment of the full amount of the antidumping duties.
As you can see, antidumping duties can severely affect an importer’s cash flow and the manipulation of entered values to reduce the amount of duties paid, or the impact on its capital structure, can have severe consequences.
Jason Klinowski is an agricultural and food law attorney at Wallace Jordan Ratliff & Brandt LLC in Birmingham, Alabama. E-mail him at [email protected] or call 205-874-0371.