Anti-dumping (AD) and countervailing duty (CVD) orders are some of the most financially consequential trade measures that US importers encounter. An AD order imposes duties on imported goods that are sold in the United States at less than fair value — below the home market price or the cost of production of the foreign manufacturer. A CVD order imposes duties on imported goods that benefited from foreign government subsidies that give the foreign manufacturer an unfair competitive advantage over US domestic producers. Both types of orders are intended to level the playing field for US industry by counteracting the price advantage that foreign goods achieve through unfair pricing or government support.
For US importers, AD and CVD orders create compliance obligations that are distinct from ordinary tariff compliance. The duty rates in AD/CVD orders are not fixed — they are assessed based on annual administrative reviews that recalculate each manufacturer’s dumping margin or subsidy rate for the review period. This means that the duty rate applicable to an importer’s goods in any given year is not known with certainty until the administrative review for that year is completed, which may be years after the imports enter the United States. Cash deposits of estimated duties are required at entry, but the actual duty liability is not determined until the review is finalized. An importer who has been depositing cash at a low rate may face a substantial retroactive assessment if the administrative review determines a higher margin, and the reverse is also possible.
The AD/CVD Investigation Process
AD and CVD investigations are initiated when a US domestic industry files a petition with the Department of Commerce (DOC) and the US International Trade Commission (ITC) alleging that imports of a specific product from a specific country are being dumped or subsidized and that those imports are materially injuring, or threatening material injury to, the US domestic industry. The ITC conducts a preliminary injury investigation to determine whether there is a reasonable indication of material injury; if the ITC makes a positive preliminary determination, DOC conducts a preliminary investigation of the dumping margin or subsidy rate and may impose preliminary measures (cash deposit requirements) on imports of the subject merchandise.
After the preliminary phase, DOC conducts a full investigation, typically selecting two or three ‘mandatory respondents’ — large foreign producers or exporters of the subject merchandise — for full investigation, while assigning other producers a rate equal to the average of the mandatory respondent rates. The ITC simultaneously conducts a final injury investigation. If both DOC and the ITC make affirmative final determinations — DOC finding that dumping or subsidization is occurring at a margin above de minimis thresholds, and the ITC finding material injury or threat thereof — DOC issues an AD or CVD order, which takes the form of a cash deposit requirement on all entries of subject merchandise from the covered country.
Scope Rulings
One of the most important and frequently overlooked aspects of AD/CVD compliance is the scope of the order: the precise description of which goods from which country are covered by the AD/CVD duty. AD/CVD order scopes are often broadly written and may capture goods that importers do not expect to be covered. Where an importer believes that its goods fall outside the scope of an existing order, it may request a scope ruling from DOC to obtain an official determination of whether the specific goods are within or outside the order’s scope. Scope rulings are binding on CBP and provide importers with certainty about their duty obligations.
Scope inquiries can go in either direction: an importer may request a scope ruling to establish that its goods are outside the scope of an order (avoiding AD/CVD duties), or a domestic petitioner may request a scope ruling to establish that goods it believes to be competing unfairly are within the scope of an order. The scope inquiry process can take many months, and during the pending inquiry, CBP typically continues to collect cash deposits at the applicable rate. If the scope ruling is adverse —onfirming that the goods are within the scope — the importer faces retroactive duty liability for all entries made during the inquiry period.
Circumvention
Circumvention of AD/CVD orders occurs when importers or foreign producers attempt to avoid AD/CVD duties by making minor modifications to the subject merchandise, processing subject merchandise in third countries before export to the United States, or importing unfinished or components forms of subject merchandise for completion in the United States. DOC has broad authority to conduct anti-circumvention inquiries and to extend the scope of AD/CVD orders to cover circumventing goods. In recent years, DOC has conducted numerous circumvention inquiries involving goods manufactured in third countries (Vietnam, Cambodia, Malaysia, Thailand) from Chinese-origin inputs that are subject to US AD/CVD orders.
For importers, circumvention findings can result in the retroactive application of AD/CVD duties to years of imports at potentially very high rates. The circumvention risk is particularly acute in product categories with high AD/CVD rates on Chinese goods — solar panels, steel products, aluminum extrusions, and a range of other categories — where the financial incentive to source from a third country that processes Chinese inputs is significant. Importers who source goods from third countries in high-risk categories should conduct careful due diligence on the origin and composition of the goods, assess whether the production operations in the third country are sufficient to avoid circumvention characterization, and monitor DOC’s ongoing circumvention inquiries in relevant product categories.
Administrative Reviews and Final Duty Rates
The annual administrative review is the mechanism by which the actual AD/CVD duty rate for a specific manufacturer is calculated for a specific annual period. Any interested party — including an importer, a foreign producer, or a domestic petitioner — may request an administrative review by DOC within a specified window each year. If no review is requested for a specific manufacturer for a specific period, the cash deposit rate continues to apply and is deemed to be the final rate for that period. If a review is requested, DOC conducts a detailed investigation of the manufacturer’s pricing and costs (for AD) or subsidy receipts (for CVD) during the review period and calculates the final duty rate, which may be higher or lower than the cash deposit rate.
For importers, the administrative review process creates significant financial uncertainty. Goods entered during a review period are entered with a cash deposit at the current estimated rate, but the final duty liability is not determined until the review is completed — a process that can take two to three years. If the final rate is higher than the cash deposit rate, the importer must pay the difference; if lower, the importer receives a refund. This uncertainty makes financial forecasting difficult for businesses that import significant volumes of AD/CVD-subject merchandise, and importers with large exposures often purchase bonds or maintain reserves to cover potential retroactive duty assessments.