Companies importing goods into the EU should be aware of a recent uptick in investigations into alleged circumvention of EU anti-dumping and/or anti-subsidy duties, and, in particular, the implications of such investigations under customs law.
For context, in August 2023, the European Commission initiated three circumvention investigations, covering imports of biodiesel consigned from China, plywood consigned from Kazakhstan and Türkiye, and stainless steel consigned from Taiwan, Türkiye and Vietnam. These investigations signal a return of the anti-circumvention instrument, which the Commission has used repeatedly, and successfully throughout the years.
Anti-circumvention investigations are peculiar because they reverse the burden of proof: if the Commission finds evidence of circumvention of anti-dumping and/or anti-subsidy duties on imports from country A through operations in country B, then every exporter in country B is deemed to be guilty of circumventing until that exporter proves that it is not circumventing. That basically requires showing that the exporter in country B is not running a screwdriver/assembly operation using inputs from country A.
A key – and often overlooked – implication of anti-circumvention investigations is the impact of these investigations under customs law.
Anti-circumvention investigations often trigger parallel investigations into customs fraud run by the European Anti-Fraud Office (OLAF), the European Public Prosecutor Office (EPPO), and/or EU Member State customs authorities. A key issue here is whether the said screwdriver/assembly operations in country B are enough to confer origin. Under EU customs law, operations set up to avoid anti-dumping and/or anti-subsidy duties do not confer origin.
There are ample examples where OLAF, EPPO, and customs authorities found that the same facts that led to circumvention findings also mean that goods assembled in country B using inputs from country A are not goods with origin B but, instead, goods with origin A.
Such a finding has far-reaching consequences. Specifically, it means that all customs declarations of imports from country B wrongly stated that the origin of the goods was country B, and that the imports were in fact subject to anti-dumping and/or anti-subsidy duties on imports from country A.
On that basis, customs authorities can collect unpaid duties (incl. VAT) and additional administrative and/or criminal fines depending on the facts and jurisdiction. There are examples where customs authorities and prosecutors have raided premises and made arrests. The total amounts can be hefty, as customs can look back three to 10 years.
The first step to mitigating the risks of getting caught up in circumvention cases and the consequential (unintended) origin fraud and duty evasion, importers should conduct a supplier and supply chain risk analysis.