1. Click to edit Master title style ADD/CVD – A Quick Surety Perspective Presented by: David F. Jordan, CHB, CPCU Vice President – Training & Education Roanoke Insurance Group February 11, 2015

2. Click to edit Master title style Introduction A brief review of what scares customs sureties more than anything…

3. Click to edit Master title style Introduction Antidumping Duty & Countervailing Duty (ADD/CVD) Perennially, the number one or number two cause of loss on customs bonds Other recurring chief loss cause is unpaid estimated D/T/F –Generally ebbs & flows with economic conditions

4. Click to edit Master title style Concern No. 1 Volatility The rate used for liquidation may bear no resemblance to the deposit rate at time of entry summary (admin reviews; litigation) –Some high-volume commodity examples: Wooden bedroom furniture –.53% to 216.01% Garlic –.95% to 376.67% (now $4.71/kilo) Solar panels/cells – 7.78% to 249.96% Aluminum extrusions – 1.51% to 374.15% (CVD)

5. Click to edit Master title style Volatility Deposit rate of zero does not mean it is not an ADD/CVD entry The scope problem: –Scope definition, not HTSUS subheading, governs “ While HTS subheadings are provided for convenience & customs purposes, the written description of the scope is dispositive.” –The aluminum extrusion example: May 26, 2011 (order date) – 15 HTSUS subheadings October 15, 2014 – 123 HTSUS subheadings

6. Click to edit Master title style An Exception… Provisional measures period –Between “preliminary determination” & “final determination” (ADD/CVD order) –Liability capped at preliminary deposit rate

7. Click to edit Master title style Concern No. 2 Delay Delay is one of a surety’s worst enemies Typical long delays on ADD/CVD liquidations, due to statutory & court-ordered indefinite suspension –Vast majority of “ordinary entries” liquidate within one year of entry date –Per GAO, average on ADD/CVD is over three years –On problem entries, we typically see four or five years –In extreme situations, we have 10 to 20 years!

8. Click to edit Master title style Concern No. 3 Lack of Control Who decides what the “final” rate should be? –International Trade Administration, U.S. Department of Commerce (DOC) Establishes rates at time of order issuance Reviews/revises rates in response to requests for admin reviews –DOC actions subject to judicial challenge Court of International Trade (CIT) U.S. Court of Appeals for the Federal Circuit (CAFC)

9. Click to edit Master title style Lack of Control Who may submit information for consideration? –Interested parties Importers/sureties –Rarely have details to make substantive submissions Shippers/exporters –Best situated to provide material info, but what if they: o Become insolvent? o Decide to cease selling to U.S.? Domestic industry

10. Click to edit Master title style Concern No. 4 A Pricing Conundrum Insurance surety pricing works on the basis of law of large numbers – predictability because of: o Large number of homogeneous units of risk o Spread (vs. narrow concentration) of risk o No single, disproportionate exposures o No adverse risk selection

11. Click to edit Master title style A Pricing Conundrum But with bonds covering ADD/CVD… –Relatively small number of ADD/CVD risk units (importers/principals) –Many such importers face enormous exposures –Not adverse selection, per se, but not commercially viable to “homogenize” rates for ADD/CVD importers with rates of non- ADD/CVD importers Only practical (semi-practical) way to compensate is to require full collateral

12. Click to edit Master title style The “Collateral Complication” Impact on importers: –Letter of credit expenses –Tying up lines of credit Impact on sureties: –Much additional handling expense with no commensurate compensation –Bank risk Impact on sureties & CHBs: –The PR problem

13. Click to edit Master title style Also of interest… Provisional measures bonding ceased in 2011 –New shipper review bonding – but no cap No drawback on ADD/CVD Dual cases/the “gap phenomenon” Non-reimbursement (ADD)/doubling

14. Click to edit Master title style Also of interest… Limited protest opportunity Extraordinary STB requirements “Critical circumstances” Byrd (CDSOA) gone – but…still payable on entries from October 30, 2000 to September 30, 2007

15. Click to edit Master title style Resources ADD Manual (DOC): http://enforcement.trade.gov/admanual/index.html ADD Glossary: http://enforcement.trade.gov/glossary.htm CBP ADD/CVD Search: http://adcvd.cbp.dhs.gov/adcvdweb/ ITC Listing of Active ADD/CVD Cases & Other Research Tools: http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/antidump_countervailing/index.htm Federal Register: http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR ACE Portal/References: AD/CVD Cases Search & AD/CVD Messages Search

16. Click to edit Master title style Bringing It All Together To learn more about Roanoke’s result-driven insurance and surety solutions for global trade and transportation, contact us today! 1-800-ROANOKE www.roanoketrade.com | info@roanoketrade.com

17. Click to edit Master title styleThank You! We hope that you found this presentation productive, practical and useful! Thank you for your time and attention. Roanoke is here to help you!

18. Click to edit Master title style Logistics Related Insurance and Surety Solutions that Provide Long Term Value Dave Jordan (847) 969-8281 dave.jordan@roanokegroup.com