For some time, a number of countries and regions, mainly the United States and the European Union, have implemented a number of anti-dumping and countervailing measures against China, which has forced a large number of Chinese enterprises to invest and set up factories in third countries, or even re-export trade, to bypass the restrictions of the above-mentioned barriers.

However, these acts are not absolutely safe, but always face the risk of anti-circumvention investigation. Through anti-circumvention investigations, the investigating authority can extend the scope of anti-dumping and countervailing measures to third-country manufacturers, upstream parts, newly developed and changed products, etc. In this regard, Beijing Dehe Heng Law Firm trade remedy business team lawyer Li Huaduan said:

"Anti-circumvention investigations have considerable 'lethality'. After an affirmative ruling, the highest tax rate is usually applied directly; it may also lead to more severe penalties, such as back payment of taxes, fines, confiscation of goods and even criminal penalties."So, in the face of anti-risk aversion, how should Chinese enterprises deal with it?

The number of anti-circumvention cases in 1. shows an increasing trend

"In recent years, there has been a relatively large increase in the number of anti-circumvention cases against Chinese companies or products with Chinese factors. At the same time, governments have also stepped up their investigations into anti-circumvention investigations. The risk of anti-circumvention investigations has become an issue that cannot be ignored by Chinese companies investing overseas." The team lawyer Liu Xinze said.

Statistics show that in 2016By 2018, it has reached an annual average of nearly 15.

"In all cases, investigations initiated on products that are re-exported or processed in third countries account for more than 70%. This shows,Investment or re-export to a third country is the most common way for Chinese companies to bypass trade remedies, and it is also the main target of anti-circumvention investigations.." Li Hua Duan analysis said.

“For Chinese companies investing overseas and exporting to Europe and the United States-oriented factories, if they fail to prevent and respond to anti-risk avoidance, they may face huge losses.." Liu Xinze said that on the one hand, projects that have invested a lot of money in construction will not be able to carry out export sales, and will face the problems of production suspension, abandonment, and investment failure; on the other hand, importers may be retroactively levied high tariffs or even be fined. This led to the breakdown of relations with the importer.and thus lose the original customers and markets.

2. survey scale is more strict

It cannot be ignored that, as the country that has initiated the most anti-circumvention investigations against Chinese companies, in recent years, the United States has passed new bills to further strengthen the functions of customs in anti-circumvention investigations, and the scale of investigations has become stricter.

"At present, most of the anti-circumvention investigations launched by various countries on Chinese enterprises involve the circumvention of processing or transshipment in third countries. Therefore,Whether processing in a third country constitutes the criteria and scale of circumvention is the most closely related issue to the overseas investment of Chinese enterprises.." Li Huaduan said.

In fact, many companies hold the view that if they invest and set up factories overseas, as long as they comply with the local applicable rules of origin, the products they produce have the identity of local origin, and they can avoid anti-dumping, countervailing and 301 against China. Measures, export to European and American countries at will.

"This view is one-sided and very dangerous." liu xinze cautioned that according to relevant laws,The U.S. Department of Commerce does not rely on the usual rules of origin when investigating whether products processed in third countries have circumvented anti-dumping and countervailing orders. Instead, there is another set of more stringent and complex criteria for identifying the country of origin in the sense of anti-dumping and countervailing duties..

3. coping strategies

How should Chinese companies deal with the risk of anti-circumvention investigations? 

Li Huaduan suggested that the supply chain and origin should be planned before investment. for chinese enterprises that plan to invest in factories overseas and export to the european and us markets,Be sure to conduct anti-circumvention due diligence and supply chain and origin planning before investing.

In accordance with the criteria for the determination of origin in the anti-circumvention rules, plan the equity setting of the investment, the location of the plant, the supply of raw materials, the investment of equipment and capital, the setting of production links, the staffing of production personnel, the arrangement of research and development of origin and the design of account management. If many categories and specifications of products are produced at the same time, and there are differences in the processing procedures, product nature and raw material sources of each product, it is best to establish a work plan and system for the determination and management of origin.

“In order to ensure that products invested and produced in third countries can be fully recognized by the U.S. Customs in terms of origin determination, enterprises may consider applying for a pre-determination of origin before investing or exporting.." Liu Xinze said.

For companies that have invested and built factories overseas but have not yet encountered anti-circumvention investigations, Liu Xinze believes that anti-circumvention risk assessments should be carried out as soon as possible, and in accordance with the regulations of the U.S. Department of Commerce and Customs, whether their products can meet the corresponding origin standards. Test and judge.

Liu Xinze said that it should betake preventive adjustment measures as early as possible,Optimize raw material procurement sources and keep complete raw material procurement records; appropriately increase the added value of local processing and make full use of local equipment and workshops; make necessary adjustments to processing procedures to ensure that the "substantial change standard" is met, and appropriately increase equipment and R & D investment in the local area; improve financial records and statistics to ensure that evidence is available and the cost of local processing can be easily calculated; improve factory site management; training staff on anti-circumvention knowledge and coping awareness。 

After being adjudicated, how should the enterprise remedy?

Regarding how to remedy the situation after the ruling, in Liu Xinze's view, the customs anti-circumvention case is only aimed at individual enterprises.

After an adverse ruling, the business mayTry to return to the U.S. market as soon as possible through corporate restructuring, rectification in accordance with anti-circumvention rules, and applying for customs pre-ruling.. "The U.S. Department of Commerce's anti-circumvention investigations are often aimed at manufacturers owned by a third country. Measures will also be taken against companies that have not been drawn as mandatory responses. But...You can try to obtain exemption as much as possible by 'proving the exporter's declaration of the importer's declaration '.." Liu Xinze said.