Key Takeaway: In the current enforcement environment, the importance of identifying tariff underpayments early has never been greater. The Department of Justice (DOJ) is aggressively expanding its use of the False Claims Act to pursue customs violations, increasing the risk of whistleblower complaints, while Customs and Border Protection (CBP) is under explicit directives to intensify administrative enforcement, expand investigations and audits, and substantially restrict the mitigating factors that historically resulted in reduced penalties. At the same time, increased use of artificial intelligence and sophisticated data analytics are enhancing the government’s ability to identify potential discrepancies in import declarations.
These developments make a robust post-entry review process essential to identifying and correcting errors before they become government enforcement matters. Where violations are discovered before entries have liquidated, importers should correct errors using post-summary corrections. Where entries have liquidated, importers should consider initiating a prior disclosure before CBP finds out about any errors, which can lock in the possibility of completing the disclosure through the payment of unpaid duties and interest – i.e., with no penalties – provided that a complete and accurate disclosure is completed. In today’s enforcement environment, proactive compliance and the prudent use of post-summary corrections and voluntary disclosures generally are far preferable to waiting for CBP — or a whistleblower — to identify the problem.
This Week in International Trade: So, does anyone really know what candy corn is made of? Or why people, who manage to live perfectly fine lives sans candy corn eleven months of the year, somehow feel compelled to buy it when the leaves start to fall? Candy corn was pumpkin spice before there was pumpkin spice.
This week’s candy corn-free international trade developments include the following:
Tariff Refunds
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Consolidated Administration and Processing of Entries (CAPE) refund processing continues. Aside from a few glitches, like how to handle International Emergency Economic Powers Act (IEEPA) tariffs that were paid as part of prior disclosures, CAPE Phase 1 refunds continue to work smoothly, with CBP largely able to issue refunds within sixty days of receiving the Phase 1 refund request.
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CBP deploys CAPE Phase 3 for finally liquidated entries under court order. CAPE Phase 3, covering entries more than 80 days past liquidation, launched October 6th for Section 1581(i) plaintiffs who submitted importer-of-record spreadsheets to CBP by July 31. Because many law firms did not receive filing instructions until August, numerous importers entitled to refunds remain temporarily unable to participate. CBP has advised the Court that additional instructions are forthcoming, but has provided no date. At one point, CBP suggested that refunds would occur on a “biweekly cadence,” which implies that the next group could open up on October 20th. CBP appears to be using the initial filings to test the system and clear the backlog before accepting a second group.
Tariff Litigation
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Court of International Trade (CIT) certifies IEEPA refund class action. The CIT has certified a class action for importers with finally liquidated entries who have not filed individual lawsuits, generally because the refunds at stake do not justify litigation costs. Although the class action may benefit smaller importers, we continue to recommend individual lawsuits for those with significant refunds at stake, given the likely delays from appealing class certification, the time required to obtain class-wide relief, and potentially substantial class counsel fees. Individual litigation remains the more direct, certain, and faster route to obtaining refunds.
Tariff Policy
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United States Trade Representative (USTR) continues the Section 301 tariffs on Chinese goods. In a development that surprised no one, the USTR is continuing the original Section 301 tariffs imposed on China in the first Trump administration.
Import Regulations & Enforcement
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EU General Courts expands transshipment rules. In an October 7th ruling involving Chinese electric bicycle components, the EU General Court held that parts imported separately over weeks or months may be classified as a complete, unassembled product if they collectively contain all essential components. The decision could allow national customs authorities to impose antidumping and other trade-defense duties without a separate European Commission circumvention investigation, exposing European assembly operations to greater scrutiny, retroactive duties, and penalties. In the current trade environment, it would not be surprising if the Department of Commerce or CBP adopt something similar when it comes to the coverage of antidumping and countervailing duty orders.
Trade Remedies
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International Trade Commission (ITC) considers Section 201 safeguard relief for lamb imports. At an October 16th hearing, U.S. lamb producers urged the ITC to recommend global safeguard tariffs, arguing that imports, primarily from Australia and New Zealand, have captured roughly 70% of the U.S. market and caused serious injury. Since the start of the Trump administration, there has been an increase in the number of trade remedy filings, including for antidumping, countervailing duty, and safeguard actions.
Export Controls & Economic Sanctions Regulations & Enforcement
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Russian National charged with smuggling dual-use technology to Russia. Illustrating the ongoing emphasis on economic sanctions and export controls violations, the DOJ charged a Russian national with operating a procurement network that allegedly used Hong Kong front companies to purchase U.S. microelectronics and transship them to Russia between March 2022 and April 2023.
Non-Trade Fun Fact of Interest Only to Me: The ticking time bomb has been a Hollywood staple since the silent-film era. Alfred Hitchcock famously explained why: A bomb exploding beneath a table provides seconds of surprise, but knowing a bomb is hidden beneath a table while unsuspecting characters talk creates minutes of suspense. In Goldfinger, James Bond stops a nuclear bomb with – naturally – just 007 seconds remaining. Galaxy Quest spoofs the cliché when a spaceship’s self-destruct countdown stops automatically with one second left because – naturally enough – its creators learned about bombs from monitoring Earth TV, and assumed that this was how countdown timers worked.
Customs has its own ticking time bombs: liquidation, which generally ends the opportunity to file post summary corrections; the 180-day protest deadline following liquidation; and the earliest potential expiration, in February 2027, of the two-year statute of limitations for filing IEEPA tariff refund lawsuits under 28 U.S.C. § 1581(i). So watch those deadlines, or you might regret it. Because Customs definitely lets its countdown timer reach zero.