Cancel OK

U.S. Cabinet Depot Evasion Ruling Huge Win for Domestic Cabinet Industry

General News

On January 27, 2022, U.S. Customs and Border Protection (“Customs”) issued an affirmative determination that the U.S. importer BGI Group (doing business as U.S. Cabinet Depot) had evaded the antidumping and countervailing duty (“AD/CVD”) orders on wooden cabinets and vanities and components thereof from China. This decisive action represents a huge win for the U.S. domestic industry. First, it subjects a significant portion of imports of wooden cabinets from Vietnam to tariffs ranging as high as 83.89%. In addition, Customs’ decision affirms the important principle that combining Chinese merchandise with components from other countries does not remove the merchandise from the scope of the AD/CVD duties.

This case began with an anonymous tip from an industry source that BGI Group was evading the AD/CVD orders. The American Kitchen Cabinet Alliance (“AKCA”), through its legal counsel at Schagrin Associates, worked extensively with this confidential informant to develop evidence to prosecute the case. On February 6, 2021, the AKCA submitted a formal allegation to Customs under the Enforce and Protect Act (“EAPA”). The allegation contained extensive evidence that BGI Group was importing cabinets without the proper payment of AD/CVD duties by importing the merchandise from Vietnam without declaring that it incorporated Chinese components. For example, U.S. import data showing surging volumes of cabinets from Vietnam after the AD/CVD orders were issued. Import data also showed that BGI Group had a history of importing cabinets from China and that BGI Group only began importing from Vietnam during 2019 and 2020. The confidential industry sources also submitted affidavits stating that BGI Group’s supplier, HOCA Vietnam, was established by a company in China named Hangzhou HOCA Kitchen & Bath Product, that HOCA Vietnam was importing components from China and incorporating those components into RTA cabinets in Vietnam, and that at the time of the confidential informants’ observations, HOCA Vietnam did not have the production capabilities to produce the volume of cabinets its was exporting to the United States. Finally, import data also specifically showed that HOCA Vietnam had been importing Chinese cabinet doors and frames into Vietnam from its Chinese affiliate.

In its final determination of evasion, Customs found that the BGI Group’s imported cabinets included Chinese components (e.g., doors and frames) that HOCA Vietnam combined with Vietnamese components (e.g., cabinet boxes) before exporting complete RTA cabinets to the United States. During the proceeding, BGI Group argued that the Chinese components should not be covered by the AD/CVD orders because the components had been further processed in Vietnam. Customs rejected this argument, finding that even if the Chinese components were further processed in Vietnam before being combined with other components, they would still properly be considered of Chinese origin and thus subject to the AD/CVD orders.

This final affirmative EAPA determination concludes more than a year’s worth of extensive efforts by the AKCA and Schagrin Associates. It represents a major milestone in the AKCA’s efforts to address illegal evasion. Customs’ action against BGI Group will subject a huge volume of Chinese cabinets to the AD/CVD duties that should have been paid, including all imports by BGI Group from March 2020 to the present. Customs’ determination discloses that the imports subject to investigation include “millions” of cabinet components from China. Moreover, legal counsel at Schagrin Associates estimates that BGI Group imported over $40 million of cabinets from Vietnam in 2020 alone. Because the AD/CVD duties will be applied to the total value of imports by BGI Group over Customs’ period of inquiry, the importer may ultimately be liable for millions of dollars in unpaid duties.

“This determination should serve as a strong deterrent to others that are currently or considering evading the AD/CVD orders put in place in April 2020,” said Betsy Natz, CEO, KCMA. “Those orders have been instrumental in revitalizing the U.S. cabinet industry, and it is thus critical that they are strictly enforced.”

Source: Kitchen Cabinet Manufacturers Association