[Federal Register Volume 74, Number 61 (Wednesday, April 1, 2009)]
[Notices]
[Pages 14809-14812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-7281]


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DEPARTMENT OF HOMELAND SECURITY

Customs and Border Protection

[Docket No. USCBP-2008-0112]


Enhanced Bonding Requirement for Certain Shrimp Importers

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: General notice.

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SUMMARY: This notice ends the designation of shrimp subject to 
antidumping or countervailing duty orders as a special category or 
covered case subject to an enhanced bonding requirement (EBR). A recent 
World Trade Organization (WTO) Appellate Body Report held that the 
application of this requirement to shrimp from Thailand and India was 
inconsistent with U.S. WTO obligations. In response to this report, 
Customs and Border Protection (CBP) is ending the designation of shrimp 
subject to antidumping or countervailing duty orders as a special 
category or covered case subject to the EBR. The shrimp importers 
affected by this requirement may request termination of any existing 
continuous bonds pursuant to 19 CFR 113.27(a) and submit a new bond 
application pursuant to 19 CFR 113.12(b).

DATES: Effective Date: The notice is effective on April 1, 2009.

FOR FURTHER INFORMATION CONTACT: David Genovese, AD/CVD & Revenue 
Policy & Programs Division, Trade Policy and Programs, Office of 
International Trade, [email protected], (202) 863-6092.

SUPPLEMENTARY INFORMATION:

Background

    A key U.S. Customs and Border Protection (CBP) mission is to 
collect all import duties determined to be due to the United States. 
Under CBP statutes and regulations, release of merchandise prior to the 
determination of all duties that may be owed is ordinarily permitted, 
provided the importer posts a bond or other security to insure payment 
of duties and compliance with other applicable laws and regulations. 
The final assessment of duties occurs at liquidation of the entry.
    The United States maintains a retrospective antidumping and 
countervailing duty system. The retrospective system means that in the 
case of goods subject to antidumping or countervailing (AD/CV) duties, 
the actual rates of AD/CV duties owed are calculated after the entry is 
made, in an assessment review conducted by the Department of Commerce 
(DOC). There is a delay between entry and final duty collection, and 
the United States requires that a security be provided. When an 
importer requests an assessment review of an AD/CV duty order, the 
amount of the duty that is ultimately assessed, based on the final AD/
CV duty rate, sometimes does not correspond to the amount of security 
posted.
    CBP follows instructions from the DOC. The DOC determines the 
actual AD/CV duty rates owed on merchandise subject to an AD/CV duty 
order. CBP assesses the duties owed on specific entries upon 
liquidation, pursuant to DOC instructions as to the final rates. 
However, CBP has found that many importers subject to AD/CV duties fail 
to pay the additional duties determined to be due at liquidation. As a 
result, because defaults on AD/CV duty supplemental bills have 
increased significantly, CBP conducted an internal policy review of 
revenue protection strategies.

[[Page 14810]]

CBP's Enhanced Bonding Requirement (EBR)

    In response to importers' increasing failure to pay additional 
duties determined to be due at liquidation, CBP reconsidered the 
general bond formula which provides that the minimum continuous bond 
may be in an amount equal to the greater of $50,000 or ten percent of 
the amount of the previous year's duties, taxes and fees. In order to 
address the growing collection problem, CBP issued four documents. 
``Amendment to Bond Directive 99-3510-004 for Certain Merchandise 
Subject to Antidumping/Countervailing Cases,'' July 9, 2004; ``Current 
Bond Formulas,'' January 25, 2005; ``Clarification to July 9, 2004 
Amended Monetary Guidelines for Setting Bond Amounts for Special 
Categories of Merchandise Subject to Antidumping and/or Countervailing 
Duty Cases,'' August 10, 2005; and Monetary Guidelines for Setting Bond 
Amounts for Importations Subject to Enhanced Bonding Requirements, 71 
FR 62276 (October 24, 2006) (all four documents are referred to 
collectively as the Amended Customs Bond Directive).
    CBP applied the Amended Customs Bond Directive to merchandise 
subject to the first antidumping orders involving agriculture and 
aquaculture merchandise imposed after the issuance of the July 2004 
Amendment to the Bond Guidelines.\1\ Known as the enhanced bonding 
requirement (EBR), CBP required that continuous bond amounts for 
importers of shrimp subject to AD/CV duty orders be increased to the 
rate established in the final AD/CV duty order, multiplied by the value 
of the importer's entries of the subject merchandise in the previous 
12-month period.
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    \1\ Notice of Amended Final Determination of Sales at Less Than 
Fair Value and Antidumping Duty Order: Certain Frozen Warmwater 
Shrimp from Brazil, 70 FR 5143 (Feb. 1, 2005); Notice of Amended 
Final Determination of Sales at Less Than Fair Value and Antidumping 
Duty Order: Certain Frozen Warmwater Shrimp from Thailand, 70 FR 
5145 (Feb. 1, 2005); Notice of Amended Final Determination of Sales 
at Less Than Fair Value and Antidumping Duty Order: Certain Frozen 
Warmwater Shrimp from India, 70 FR 5147 (Feb. 1, 2005); Notice of 
Amended Final Determination of Sales at Less Than Fair Value and 
Antidumping Duty Order: Certain Frozen Warmwater Shrimp from 
People's Republic of China, 70 FR 5149 (Feb. 1, 2005); Notice of 
Amended Final Determination of Sales at Less Than Fair Value and 
Antidumping Duty Order: Certain Frozen Warmwater Shrimp from the 
Socialist Republic of Vietnam, 70 FR 5152 (Feb. 1, 2005); and Notice 
of Amended Final Determination of Sales at Less Than Fair Value and 
Antidumping Duty Order: Certain Frozen Warmwater Shrimp from 
Ecuador, 70 FR 5156 (Feb. 1, 2005).
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World Trade Organization Disputes Regarding EBR

    On April 24, 2006, Thailand requested consultations with respect to 
certain issues relating to the imposition of antidumping measures on 
shrimp from Thailand, including the application of the EBR to importers 
of shrimp from Thailand. Thailand requested the establishment of a 
dispute settlement panel on September 15, 2006, and the World Trade 
Organization (WTO) Dispute Settlement Body (DSB) established a panel on 
October 26, 2006.
    On June 6, 2006, India requested consultations with respect to 
certain issues relating to the Amended Customs Bond Directive and the 
EBR. India alleged that the United States had imposed on importers a 
requirement to maintain a continuous entry bond in the amount of the 
anti-dumping duty margin multiplied by the value of imports of subject 
shrimp imported by the importer in the preceding year, and that this 
action breached several provisions of the General Agreement on Tariffs 
and Trade 1994 (GATT 1994), the WTO Agreement on Implementation of 
Article VI of the General Agreement on Tariffs and Trade 1994 (AD 
Agreement), and the Agreement on Subsidies and Countervailing Measures 
(SCM Agreement). India requested the establishment of a panel on 
October 13, 2006, and the DSB established a panel on November 21, 2006.
    The panels circulated the reports in both disputes on February 29, 
2008. Among other things, the panels found that the EBR as applied to 
importers of shrimp from Thailand and India was a ``specific action 
against dumping'' inconsistent with Article 18.1 of the AD Agreement 
and was inconsistent with the Ad Note to paragraphs 2 and 3 of GATT 
1994 Article VI because it did not constitute ``reasonable'' 
security.\2\ Thailand and India disagreed with several of the panels' 
findings with respect to the additional bond requirement and appealed 
those findings on April 17, 2008.\3\ The United States cross-appealed 
one aspect of those findings on April 29, 2008.\4\
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    \2\ Panel Report, United States--Measures Relating to Shrimp 
from Thailand, WT/DS343/R, adopted August 1, 2008.
    \3\ Annexes I and II to WTO Appellate Body Report, United 
States--Measures Relating to Shrimp from Thailand and United 
States--Customs Bond Directive for Merchandise Subject to Anti-
Dumping/Countervailing Duties, WT/DS343/AB/R and WT/DS345/AB/R, 
adopted August 1, 2008. (WTO AB Report.)
    \4\ Annexes III and IV to WTO AB Report.
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    The Appellate Body report was issued on July 16, 2008.\5\ The 
Appellate Body agreed with the panels in finding that the Amended 
Customs Bond Directive was not ``as such'' inconsistent with the AD 
Agreement or the SCM Agreement. Id. at paras. 270, 275. The Appellate 
Body found that the panels properly concluded that the EBR as applied 
to importers of shrimp from Thailand and India did not constitute 
reasonable security. The Panel and Appellate Body reports were adopted 
by the DSB on August 1, 2008. On August 29, 2008, the United States 
indicated that it intended to comply with the recommendations and 
findings of the DSB.
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    \5\ WTO AB Report.
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Notice of Proposed Modification

    On January 12, 2009, CBP published a notice in the Federal Register 
(74 FR 1224) that proposed to end the designation of shrimp covered by 
antidumping or countervailing duty orders as a special category or 
covered case subject to the requirement of additional bond amounts, to 
comply with the recommendations of the DSB. The notice also proposed 
that shrimp importers may request termination of existing continuous 
bonds pursuant to 19 CFR 113.27(a) and submit a new continuous bond 
application pursuant to 19 CFR 113.12(b). The notice of proposed 
modification solicited comments from the public, and the comment period 
closed on February 11, 2009.

Discussion of Comments

    Twelve parties responded to the solicitation of comments in the 
notice of proposed modification. A description of the comments 
contained in the submission and CBP's analysis is set forth below.
    Comment: One commenter argues that CBP should devise a bonding 
mechanism for imports of shrimp and other agriculture and aquaculture 
products subject to antidumping or countervailing duties that will 
provide additional assurance that all such duties will be collected, 
that it should explain how any new bonding mechanism addresses ``the 
large and increasing'' amount of uncollected or uncollectible duties, 
and that it must ``implement any new bonding mechanism prospectively 
only, as required by law.'' The commenter notes that revenue loss 
continues to be an issue with agriculture and aquaculture products 
subject to AD/CV duty orders including shrimp and therefore CBP's 
concerns that led to the EBR were appropriate.
    The commenter further contends that CBP's proposal to no longer 
require the EBR with respect to shrimp importers rewards and further 
encourages the refusal by certain importers to abide by

[[Page 14811]]

their legal requirements. The commenter states that as CBP is well 
aware from its past efforts to enforce the trade laws and collect 
duties owed, for many agriculture/aquaculture products (and, 
separately, non-agriculture/aquaculture products of Chinese origin), 
the companies that become the importer of record for such goods 
frequently have little intent, much less ability, to pay duties above 
the deposit rate.
    The commenter requests that CBP immediately withdraw its proposal 
to terminate the designation of shrimp covered by AD/CV orders as a 
special category or covered case subject to the requirement of 
additional bond amounts. Instead, the commenter recommends that CBP 
issue a proposal and/or seek comments on amending the EBR in order to 
both comply with the WTO's Appellate Body report and address the under-
collection of AD/CV duties.
    Another commenter states that CBP should use the proposal as an 
opportunity to include an individual importer risk assessment into its 
bond analysis. The commenter asserts that the ``one size fits all'' EBR 
policy based on a sector or category wide risk assessment usurps the 
core factors of objective risk analysis and imposes a severe strain on 
the balance sheets of otherwise healthy companies. The commenter 
contends that a bond based on an assessment for individual importers is 
not only good Federal policy, but also a necessary analysis for defense 
of CBP's actions before reviewing panels of the WTO. The commenter 
further contends that a transparent system supported by substantial 
evidence is essential to an effective EBR. The commenter maintains that 
the tools are present for CBP to give proper emphasis to companies with 
proven track records and solid balance sheets.
    CBP's Response: Although CBP is no longer designating shrimp 
subject to antidumping or countervailing duty orders as a special 
category or covered case subject to the EBR, CBP is not abandoning its 
duty to protect revenue or its requirement of sufficient security. In 
its report, the WTO Appellate Body concluded that the United States 
could impose ``reasonable security'' on entries made after the 
imposition of an antidumping duty order and before the final assessment 
of antidumping duties, but that the EBR, as applied to importers of 
shrimp from Thailand and India was not ``reasonable security''. 
Consistent with that finding, CBP is ending the designation of shrimp 
as a covered case or special category subject to the EBR.
    As for the other commenter's suggestions for possible methods for 
future bonding requirements, CBP continues to explore options to 
protect revenue and address issues of uncollected AD/CV duties, 
consistent with U.S. international obligations.
    Comment: Several commenters support the withdrawal of the 
designation of shrimp under the EBR, but argue that it should apply 
retroactively to all entries of subject merchandise covered by bonds 
calculated using the EBR, and not just to entries made on or after the 
effective date of the final notice.
    Supporters of retroactive application of the proposal contend that 
because the WTO Appellate Body upheld the panel's findings that the EBR 
is inconsistent with WTO agreements, compliance with the WTO's rulings 
would preclude CBP from continuing to treat pre-existing EBR-calculated 
bonds as valid and enforceable security after the date of 
implementation or from taking any future action to make a claim against 
the bonds. Consequently, commenters in support of the retroactive 
application of the proposal argue that in order to comply with the WTO 
reports, CBP must not only stop applying the EBR to imports of subject 
shrimp going forward, but must also ``cancel'' (as one commenter 
describes it) or ``retroactively eliminate'' (as another commenter 
argues), bonds to which the EBR has been applied and replace them with 
bonds based on the standard bond formula of 10% of the previous year's 
duties, taxes, and fees, or $50,000, whichever is greater. Supporters 
assert that retroactively applying the proposal is necessary to address 
surety collateral requirements which have burdened importers' credit 
lines, causing significant economic harm.
    One supporter of the retroactive application of the proposal cites 
to National Fisheries Institute, Inc. v. United States Bureau of 
Customs and Border Protection (465 F. Supp. 2d 1300, 1335-36 (Ct. Int'l 
Trade 2006)) (National Fisheries) to argue that CBP has authority to do 
this, and claim that this authority has been recognized by the courts.
    One commenter argues that canceling the bonds to which the EBR was 
applied would not be retroactive because the United States would be 
agreeing to make no future claims against the EBR-calculated bonds.
    One commenter urges CBP to automatically terminate all existing 
continuous bonds and institute new bonds at the minimum required 
obligation rather than require individual importers to submit 
individual termination requests in order to expedite U.S. compliance 
with rulings of the DSB.
    Another commenter argues that allowing importers to terminate 
existing continuous bonds would risk CBP's ability to fully collect 
duties owed.
    CBP's Response: CBP is ending the designation of frozen warmwater 
shrimp subject to AD/CV duties as a special category or covered case 
for purposes of the EBR, and is providing importers with an opportunity 
to request that existing bonds be terminated pursuant to 19 CFR 
113.27(a) and submit a new continuous bond application pursuant to 19 
CFR 113.12(b). These actions bring the United States into compliance 
with the recommendations and rulings of the DSB regarding the EBR. The 
effective date is the publication date of this notice.
    CBP disagrees with the commenters' statement that CBP must apply 
the proposal retroactively. When a bond is terminated, no further 
obligations arising from post-termination customs transactions may be 
charged against the bond. See 19 CFR 113.27(c); see also HQ 211485 (May 
12, 1980). The principal (in this case, the importer) and the surety 
remain liable for the obligations incurred before the date the bond was 
terminated. See 19 CFR 113.3. Termination of the bond does not alter 
the obligations charged against the bond before it was terminated, but 
does prevent any obligations arising from post-termination customs 
transactions from being charged against the bond. See 19 CFR 113.27(c); 
see also HQ 211485 (May 12, 1980).
    CBP has determined that it will permit importers to terminate EBR-
calculated bonds. The only legal authority commenters cite for the 
proposition that CBP could ``cancel'' or otherwise retroactively apply 
the policy is the decision of the U.S. Court of International Trade in 
National Fisheries. However, the court made no such finding in that 
case, nor did it order cancellation or ``retroactive elimination'' of 
bonds. National Fisheries at 1335-1336. Moreover, bonds are contracts 
between principals and sureties, and are thus contracts between private 
parties. CBP is reluctant to interfere in that relationship. See 
Customs Bond Structure, Revision, 49 FR 41152, 41155 (October 19, 
1984). In addition, the existence of two bonds covering the same period 
could pose legal confusion. If different sureties issued the bonds, 
each would raise the other as a defense in a collection action, posing 
serious risk to the agency's ability to collect duties lawfully owed

[[Page 14812]]

through court action. Furthermore, canceling an existing bond and 
replacing it with another bond with a different limit of liability 
(either lower or higher) and with retroactive effect is contrary to 
sound administrative practice. There are approximately 140,000 bonds 
currently on file with CBP. The possibility that each and every one of 
these bonds may be reconsidered and liability reassessed anytime after 
execution would cause administrative chaos. Finally, to avoid 
confusion, termination will not occur automatically and importers must 
request termination pursuant to 19 CFR 113.27(a).
    CBP requires bonds to protect revenue and assure compliance with 
any provision of law, regulation, or instruction the agency is 
authorized to enforce. See 19 U.S.C. 1623. CBP is also required to 
collect debts aggressively. See 31 U.S.C. 3711 and 31 CFR 901.1. In 
order to fulfill its mandate and also facilitate trade, CBP does not 
retroactively raise or lower bond security amounts that cover past 
customs transactions. When CBP determines that an existing bond does 
not provide sufficient security, the principal is only required to 
terminate the existing bond and obtain a new bond with additional 
security for future importations. The obligation of the earlier bond 
for the earlier time period remains in place. See 19 CFR 113.3.
    It is incorrect to state that if the United States were to agree to 
make no future claims against the EBR-calculated bonds, then the 
cancellation of the bonds would not be retroactive. Cancelling the 
bonds would be retroactive because the bonds secure customs 
transactions, which are, in this case, entries already made into the 
United States. As discussed in the Background section of this notice, 
even though the actual amount of AD/CV duties owed may be determined at 
a later date, the obligation is incurred and security is posted at the 
time of entry. Finally, the U.S. Court of International Trade in 
National Fisheries did not order CBP to cancel the bonds at issue in 
that case, and therefore does not support the commenters' argument that 
CBP should cancel the EBR-calculated bonds. National Fisheries at 1335-
1336.
    Therefore, on or after the publication of this notice, an importer 
with a current bond that was calculated using the EBR may request 
termination pursuant to 19 CFR 113.27(a), such that no further 
obligations would be charged against that bond. For existing bonds, CBP 
will enforce the bonds up to the date of termination, which will be no 
earlier than the effective date of this notice.
    Comment: Some commenters recommend that even though the proposal 
indicates that it applies to shrimp imports from all of the countries 
subject to an AD order, to avoid confusion, CBP should specifically 
state this in the final notice and list the individual countries.
    Another commenter asserts that the proposal should only apply to 
India and Thailand because the WTO dispute was initiated by these 
countries and therefore, the recommendation only applies to those 
countries and not Brazil, China, and Vietnam. The commenter states that 
continuing to apply the EBR to Brazil, China, and Vietnam would help to 
offset any revenue loss on those cases. The commenter also states that 
discontinuing application to those countries would be contrary to CBP's 
commitment to Congress to address the issue of non-collection of AD 
duties and is irrational, unwarranted, and a clear perversion of CBP's 
mission to collect all import duties determined to be due to the United 
States.
    CBP's Response: Based on a careful evaluation of the WTO reports 
and available evidence, CBP has decided to end the designation of 
shrimp subject to AD/CV duty orders as a special category or covered 
case subject to the requirement of additional bond amounts for all 
countries. For a list of orders currently covering shrimp, see footnote 
1 of this document.

Conclusion

    After analysis of the comments and further review of the matter, 
CBP has decided to end the designation of shrimp covered by antidumping 
or countervailing duty orders as a special category or covered case 
subject to the requirement of additional bond amounts. Shrimp importers 
may request termination of existing continuous bonds pursuant to 19 CFR 
113.27(a) and submit a new continuous bond application pursuant to 19 
CFR 113.12(b). The requirements for submitting a new bond application 
pursuant to 19 CFR 113.12 are available on the CBP Web site at http://www.cbp.gov/xp/cgov/trade/priority_trade/revenue/bonds/pilot_program/news_develop/ under the ``Policy and Procedures'' section.

    Dated: March 27, 2009.
Jayson P. Ahern,
Acting Commissioner, Customs and Border Protection.
[FR Doc. E9-7281 Filed 3-31-09; 8:45 am]
BILLING CODE 9110-06-P