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Payment of Antidumping duties - Fact sheet

by 5m Editor
15 November 2004, at 12:00am

By the NPPC - This article offers US and Canadian pork producers questions and answers on the current situation concerning payment of antidumping duties.

My weaned pig broker has told me that I must pay $5/head for the antidumping duty? Is this correct?

Unless you are the official “importer of record” you are not required to pay any antidumping duty. You would almost certainly be aware if you were the importer of record. If you were the importer of record, you would be responsible for submitting documents to the U.S. Customs Bureau that were necessary to import hogs from Canada to the United States. If you believe you might be the importer of record, you should ask for more information from your broker.

In many cases, brokers are the “importer of record.” Some brokers are apparently informing their customers that the customers must pay the duties to them immediately. It is important to keep in mind that no one, not even the broker, has yet been required to pay any antidumping duties. Instead, the “importer of record,” probably the broker, has only been required to post a bond. No cash payment will be required to be made to the U.S. Government until at least March 2005. In other words, no one has been required by the U.S. Government to pay $5/head for any antidumping duty.

It appears that many brokers are asking customers to pay a higher price now to cover the broker’s potential future liability in the future. Any higher price (including the additional $5/head) that would be paid now would go directly to the broker. In the future, the importer of record (the broker) will be responsible for the payment of any duty that will be imposed. But no duties are being collected by the U.S. Government (through the U.S. Customs Bureau) at this time.

My broker has told me that I am required to pay the duty under the terms of my contract? Is this correct?

First, the dumping law does not require that you, as a U.S. producer, must pay the antidumping duty. Only the official “importer of record” is required to pay a dumping duty to the U.S. Government.

Second, the question of who must eventually bear the cost of the duty under the terms of your contract would depend on the specific terms of your contract. It is not likely, however, that your contract would specifically state who would be responsible for paying antidumping duties. Your broker may believe that under the terms of the contract he is permitted to pass these costs on to you. This issue is a matter of contract law and would depend on the specific terms of your contract and the contract laws of your state. You should keep in mind that regardless of the terms of your contract, no actual duties have been paid to the U.S. Government. If your broker has informed you that the dumping duties are $5/head, this figure is simply the broker’s estimate of his potential future liability. At this point, your broker has not been required to pay any actual duties to the U.S. Government. At this time, the importers of record have only been required to post a bond.

The broker I buy pigs from says they can’t be the importer of record even though they have filed the import documents with the Customs Bureau in the past. Is this true?

This statement is not correct. The broker can continue to be the importer of record. The broker may not wish to continue to be the importer of record because of potential future liability. But, the dumping laws do not prevent a broker from being an importer of record.

I took delivery of some feeder pigs from Canada and now the broker wants me to pay $5.00 per head for the duty. Can they demand payment after I’ve received the pigs?

Any requests for additional payment are a matter of price negotiation between you and the broker. Additional payments by you to the broker are not required by the antidumping law.

No one has been required to pay $5/head to the U.S. Government for the duty. If a broker has told you that you must pay $5/head for the duty, he is apparently trying to get payment now for his potential liability in the future. It is unlikely that the terms of your contract would require you to pay the broker after you have already taken delivery of the pigs, but resolution of this question would depend on the specific terms of your contract and the contract laws of your state.

The producer I buy pigs from in Manitoba says it’s illegal for them to renegotiate the price of the feeder pigs I’m buying. Can they make me pay the duty without any corresponding decrease in the price of the pigs?

It is not illegal under the antidumping law for you and the Manitoba producer to renegotiate the price of the feeder pig. Both parties are free to negotiate any price for the feeder hogs.

While all parties are free to renegotiate the price, if the Manitoba producer lowers his price to his U.S. customers and does not lower his price to his customers in Canada, he might be increasing his exposure to antidumping duties in the future. The dumping duty is calculated based on a comparison to the producer’s price in the U.S. and his price in Canada. The lower his U.S. price in comparison to his Canadian price, the higher the dumping margin. To eliminate the dumping margin, the Manitoba producer can increase his price to his U.S. customers or he could lower his price to his Canadian customers. These changes in price are a matter of price negotiation and are not required by the antidumping law.

Why does the U.S. producer have to pay instead of the Canadian producer?

Only the official “importer of record” is required to pay the dumping duty. Brokers or other parties to the contract may seek to renegotiate the terms of a contract to take into account the amount of the duty. This is a matter of price negotiation and contract renegotiation, but it is not required under the antidumping law.

Can Canadian producers force U.S. producers to pay the duty?

Only the official “importer of record” is required to pay the dumping duty. Brokers or other parties to a contract may seek to renegotiate the terms of the contract to take into account the duties. This is a matter of price negotiation and contract renegotiation, but it is not required under the antidumping law.

What happens if I refuse to pay the duty?

If a Canadian broker is the importer of record, the broker is required to pay the duty. If the broker is charging you an additional amount to take into account the duty, and you refuse to pay the additional amount being charged by the broker, this is a matter of contract and price negotiation between you and the broker. You cannot be held legally responsible for the payment of the duty by the U.S. Government and you would not be violating any U.S. laws by refusing to pay the duty.

Why are U.S. importers required to pay the duty?

They are not. The antidumping duty law requires “importers of record” to pay the duty because these are the people who submit the paperwork to the U.S. Customs Bureau to import goods into the United States and are considered the responsible party. If an entity wishes to arrange for the importation of goods from another country, then it must go through U.S. Customs. Other than the party that submits the paperwork to the U.S. Customs Bureau, the U.S. Government would have no authority to require anyone else to pay a duty.

Where does the check for the duty go?

If you pay a broker for an amount for the duty, the check will go into the broker’s general funds, unless he has informed you that he is setting up a special escrow fund for any future potential duties that he may owe. At this time, the broker is only required to post a bond with the U.S. Government. If a broker eventually is required to pay the actual duty to the U.S. Government, this duty payment goes into the U.S. Treasury.

Under current U.S. law, the so-called “Byrd Amendment,” antidumping duties that have been finally assessed and collected by the Customs Bureau are potentially available for distribution to U.S. producers who support an antidumping case. In this case, if the Byrd Amendment remains in effect, the earliest that any distribution could be made would be December 2006, but it is unlikely that any distributions would be made until December 2007. To be eligible to receive a distribution, a U.S. producer can file a public statement of support for the unfair trade case with the U.S. International Trade Commission, 500 E Street, S.W., Washington, DC 20436 prior to the conclusion of the U.S. International Trade Commission’s final determination, which will likely be made sometime in April 2005.

The WTO has found the Byrd Amendment to be illegal. Most observers do not expect the Bryd Amendment to be around much longer. Nevertheless, given that the Byrd Amendment is current U.S. law, we felt obliged, as a trade association, to disclose the information about the Byrd Amendment to U.S. producers.

What happens if producers in Canada refuse to honor their contracts?

The Canadian producer would likely be in breach of his contract and you might be able to hold them responsible for any damages. This would be a matter of contract law and the laws of your state and you would need to contact an attorney.

Can pigs cross the border before or without paying the duty or posting a bond?

A bond must be posted before any Canadian pigs subject to the duty can cross the border. All Canadian pigs are subject to the antidumping duties, except for pigs exported by Hytek and breeding stock. In its preliminary determination, the Commerce Department found that Hytek was not dumping its hogs in the United States and therefore at this time, hogs exported by Hytek are exempt from the duties. The Commerce Department is continuing to investigate the sales by Hytek.

Do farmers have to prepay for the pigs in order to pay the duty?

The dumping law does not require U.S. producers to prepay for the pigs. Any prepayment for pigs would be a matter of price negotiation between the Canadian producer and the U.S. producer.

How are duties collected on market hogs that are sold on the basis of grade and yield to an U.S. packer when the value isn’t yet determined at the time they cross the border?

At this time, no actual duties are being collected, only bonds are being posted. In the future, any cash deposits that will be posted will be based on the declared value of the merchandise at the border. These deposits will still only be estimates of future dumping liability. The final assessment of the duty will likely not take place until after there is an actual sale.

Why is there is so much misinformation circulating about the payment of the duty?

Many Canadian producers and brokers are conveying false and misleading information to U.S. producers about the liability for duties, the ability to negotiate prices, etc. Their motivation is simply to avoid any potential future liability for duties and to extract as much money as possible from U.S. purchasers. In addition, the Pork Trade Action Coalition (PTAC), an organization masquerading as a U.S. producer group, was recently formed by the Canadian Pork Council (CPC), Manitoba Pork and the Ontario Pork Council. The President of the CPC, in public remarks, has stated they are raising $10 to $15 million to influence the process in the United States. The former USDA official who purports to represent U.S. hog producers is working for a Washington D.C. firm that is representing PTAC.

NPPC is pleased to answer any questions you have about the requirements of the U.S. anti-dumping law and the realities of the case. For more information, producers should consult attorneys on specific questions related to contractual arrangements related to Canadian swine.

Source: National Pork Producers Council (NPPC) - November 2004