CBP Launches EAPA Investigation on Possible Evasion of Duties on Soil Pipe and Fittings

The investigation is based on allegations from the Cast Iron Soil Pipe Institute (CISPI), which claimed that LDL Trading has multiple links to its “apparent affiliate,” Copperfit Industries, and that LDL Trading appeared to function as a “corporate mask" for Copperfit to import Chinese-origin cast iron soil pipe and fittings.

CISPI said a Malaysian company, Vanguard Metal Fabrication, shipped over 1,000 metric tons of cast iron soil pipe and fittings to LDL Trading between October 2021 and August 2022. The only activity that could be found for LDL Trading was the receipt of shipments from Vanguard. Therefore, LDL Trading may have served as the importer of record for the Vanguard cast iron soil pipe and pipe fittings shipments and, therefore, that LDL Trading may be a corporate front "established to mask the ultimate customer" -- Copperfit -- "in order to further its transshipment scheme."

The allegations stated that “Cast Iron Pipe” shipments for LDL Trading were listed under Harmonized Tariff Schedule heading 7303.00 and "Cast Iron Pipe Fittings” were listed under HTS heading 7307.11, both of which were included in the scope of the AD/CVD orders. Some shipments of cast iron soil pipe were labeled as “Cast Iron Pipe” and are listed under HTS heading 7307.19, which "may be evidence of misclassification [and] LDL Trading’s further attempt to disguise the merchandise received from Vanguard."

The establishment of Vanguard appeared to be similar to instances in other EAPA investigations where a Chinese producer had set up a company in a third country using a Chinese employee as the incorporator and director to mask transshipment of covered merchandise from China, CISPI said, noting that Vanguard listed Peng Liu, a Chinese national, as its sole shareholder.

Vanguard’s business registration showed that the company was incorporated in November 2019, not long after the Commerce Department’s final determinations in the AD/CVD investigations. Vanguard’s website contained photos of cast iron soil pipe and pipe fittings production and claims that its products are “Made in Malaysia.” However, the allegations contended that Vanguard’s website actually showed production in China by its apparent parent company, Sandstein. Some of the photos appeared to be identical and one of Sandstein's employees, Flora Liu, "appeared to be the same individual" as Peng Liu, Vanguard's sole shareholder.

CBP found that there was sufficient evidence to begin two EAPA investigations and initiated them on Oct. 27 (later consolidated). CBP then visited four supposed Vanguard locations in Malaysia, none of which appeared to be iron manufacturing facilities. At one location, a woman informed CBP that her company handled all of Vanguard’s paperwork for Malaysia, and that Vanguard consisted of only two individuals, a Chinese national and a partner in the U.S.

In its questionnaire responses, LDL Trading provided Vanguard employee timecards, a production procedure spreadsheet,electricity invoices, mill test certificates, Vanguard ownership documentation, packing cost spreadsheets, raw material invoices for pig iron, bank statements, purchase orders from LDL Trading to Vanguard, and production records. CBP found that many of the records were incomplete and production videos did not show iron smelting. Further, HTS numbers used by LDL Trading for entries were outside the scope of the AD/CVD orders, making it appear that LDL Trading had misclassified merchandise.

CBP also conducted cargo inspections of two LDL entries and found boxes marked with Copperfit's name and received communications from a Copperfit employee regarding the inspections, which CBP said supported the conclusion that LDL Trading was set up to as a corporate front for Copperfit.

Based on the evidence, CBP concluded that reasonable suspicion of evasion existed and imposed interim measures. The agency will suspend the liquidation of each unliquidated entry of covered merchandise that entered on or after the date of the initiation of the investigation (i.e., Oct. 27, 2022), extend the period for liquidating each unliquidated entry that entered before Oct. 27, and may take such additional measures as determined necessary, including requiring a single transaction bond or additional security or the posting of a cash deposit with respect to such covered merchandise. In addition, CBP will require live entry, requiring cash deposits to be posted prior to release of merchandise from CBP custody and will reject any entry summaries that do not comply with live entry procedure.

Neither CISPI nor LDL Trading responded to requests for comment.