Importing Under COVID-19: Companies Suffering Financial Hardship Receive 90-Day Reprieve to Pay Duties

Late on April 19, 2020, the US Treasury Department and US Customs and Border Protection (CBP) released a temporary final rule, which provides that such importers may defer payment of most non-deposited estimated most-favored nation (MFN) duties, taxes, and fees on formal consumption entries without penalty or interest. MFN duties do not include antidumping or countervailing duties, or duties resulting from Section 201, 232, or 301 tariffs.

Because these charges are ordinarily due upon entry, the deferral provides temporary cash-flow relief for US importers facing financial distress and liquidity concerns. President Trump signed an executive order authorizing these deferrals over the weekend pursuant to his earlier proclamation designating the COVID–19 pandemic a national emergency.

The announcement follows a previously abandoned CBP action to provide relief, intense lobbying on both sides of the issue, and mixed signals from the Trump Administration. In March, Arent Fox reported that CBP had begun accepting case-by-case requests to defer import payments, only to have the agency backtrack days later.

CBP guidance (CSMS 42421561, CSMS 42423171), summarized below, defines significant financial hardship, outlines the charges eligible for deferral, and sets forth payment instructions and timeframes. On April 20, CBP also published a FAQ page on its website.

Significant Financial Hardship

A significant financial hardship means:

• Full or partial suspension of the importer’s business operation during March 2020 or April 2020 due to a government order concerning COVID-19; and
• Importer’s business suspension results in gross receipts between March 13, 2020 through April 30, 2020 to be less than 60% the gross receipts for a comparable period in 2019. “Gross receipts” is defined at 26 CFR 1.993-6.

An importer will be eligible for this temporary relief without filing documentation with CBP, provided the importer has sufficient record to support the significant financial hardship described above. While the documentation is not required at importation, CBP can ensure compliance by conducting a review of this documentation at a future date.

Entries Not Eligible for 90-Day Postponement

This temporary relief only applies to non-deposited duties, taxes, and fees on formal entries for consumption in March 2020 or April 2020. This includes formal entries of merchandise entered, or withdrawn from warehouse, for consumption, as well as entries for consumption from a Foreign Trade Zone.

However, this relief does not apply to any entry that includes any merchandise subject to one or more of the following:

• Antidumping or countervailing duties,
• Section 201 duties pursuant to the Trade Act of 1974
• Section 232 duties pursuant to the Trade Expansion Act of 1962, and
• Section 301 duties pursuant to the Trade Act of 1974.

Importers must ensure that their entries do not include merchandise that is ineligible for the relief prior to deferring duties. For example, if an entry includes the following two goods – (1) an ineligible good subject to antidumping duties; and (2) an eligible good only subject to MFN duties – the entire entry will be ineligible for the relief.

However, for entries that include both eligible and ineligible merchandise, CBP has authorized a submission of separate entries pursuant to 19 CFR 141.52 so that the eligible merchandise can receive this relief. Going forward, based on this authorization, a shipment with both eligible and ineligible merchandise can be filed as two separate entries:

• (1) an entry with the ineligible merchandise (e.g., a subject to antidumping duties) that cannot receive this temporary relief; and
• (2) an entry with the eligible merchandise (e.g., only subject to MFN duties) that receives this temporary relief.

This authorization to separate entries only applies to entries that have not been filed yet, and thus does not apply to any entries that have been previously filed.

CBP indicates that MFN duties and other charges on products that the US Trade Representative (USTR) has excluded from Section 301 duties are eligible for the deferral as long as the exclusion is in effect at the time of entry.

Payment Instructions and Timeframes

CBP is encouraging importers to take advantage of Automated Clearinghouse (ACH) for electronic payments, though postponed payment of an entry summary without penalty is still available via single-pay check, ACH Daily and Monthly Statement, or Periodic Monthly Statement (PMS).

Eligible importers that take advantage of this temporary relief have the responsibility to schedule the postponed payments, and should note that CBP will not adjust any statement dates.  Guidance on scheduling this 90-day postponement period has been provided as follows:

• Estimated duties, taxes, and fees paid on Single Pay Basis or Daily Statement:  may be postponed up to 90 days from the payment due date as shown in the following  example:

Original Due Date

90-Day Postponement

April 30, 2020

July 29, 2020

• Estimated Internal Revenue Tax Paid via Deferred Tax Schedule: may be postponed up to three months from the payment due date as shown in the following example:

Original Due Date

3 Month Postponement

April 29, 2020

July 29, 2020

May 14, 2020

August 14, 2020

• Estimated duties and fees paid via Periodic Monthly Statement (PMS): may be postponed up to three months, as defined by the 15th working day of the third month, as shown.  For example:

Original Due Date

3 Month Postponement

April 21, 2020

July 22, 2020

May 21, 2020

August 21, 2020

Additional payment instructions for this temporary relief related to importers’ duty payment methods including Periodic Monthly Statement (PMS) and ACH Daily Statements is available at CSMS message #42421561 and CSMS message #42423171.

Conclusion

Requirements for this temporary relief continue to evolve and are subject to public comments that may modify CBP’s temporary final rule. Arent Fox will continue to monitor developments and can help companies determine if they are eligible for duty deferral in these increasingly challenging times.