U.S. customs duties can be suspended due to COVID-19 hardships
Importers can benefit from a deferral, but the suspension is limited
INSIGHT ARTICLE |
On April 18, 2020, President Donald Trump issued an executive order that authorized the Secretary of the Treasury to exercise the authority under section 318(a) of the Tariff Act of 1930 to temporarily postpone, for 90 days, the deposit of customs duties, taxes and fees for imported merchandise. Treasury and the Department of Homeland Security (U.S. Customs and Border Protection) collaborated to amend CBP regulations by adding a new section 24.1a to title 19 of the Code of Federal Regulations (19 CFR 24.1a). In addition to the deferral, no interest will accrue for the delayed deposit of the estimated duties, taxes and fees.
To qualify for this temporary postponement, an importer must demonstrate a significant financial hardship. An importer’s operation must be fully or partially suspended during March or April 2020 due to orders from a competent governmental authority limiting commerce, travel or group meetings because of COVID-19, and as a result of such suspension, the gross receipts of such importer for March 13–31, 2020, or April 2020, are less than 60% of the gross receipts for the same period in 2019.
The temporary postponement benefit is limited, however, both in time and scope. The benefit is applicable for customs entries filed by importers between March 1 and April 30, 2020. In terms of scope, the limitations are two-fold: First, any deposits of duties, taxes and/or fees already paid are not recoverable. Second, the benefit does not apply to any entry, or consumption withdrawal from warehouse, where the entry summary includes any merchandise subject to one or more of the following duties: antidumping, countervailing, section 232 (e.g., additional steel and aluminum tariffs), section 201 (e.g., solar cells and panels), and section 301 (e.g., additional tariffs on China-origin products).
This temporary deferral has been hoped for among U.S. importers and should help to relieve some cash-flow pressures. In particular, importers of industrial, consumer and other products from Europe, Brazil, Japan, South Asia and other key U.S. trading partners should benefit from the move. At the same time, many companies sourcing the expansive array of Chinese goods subjected to the higher section 301 duty rates will continue to find no relief in this measure. Items entering the United States preferentially under a trade agreement (e.g., NAFTA for Canadian and Mexican goods) are generally not affected.
Considering the benefit limitations and requirements, importers should 1) take careful consideration when preparing import entries, and 2) document their COVID-19 financial hardship. As many import entries contain multiple items and the presence of even one excluded item will negate the benefit for all the products on the entry, importers should file separate entries for included and excluded items. Importers should also be prepared to demonstrate their eligibility to claim the temporary postponement benefit by documenting the financial impact of the COVID-19 economic activity suspension orders. While the documentation does not need to be filed with CBP, it must be maintained as part of the company’s books and records.