Author: John Foote
On Sunday April 19, President Trump issued an Executive Order, accompanied by an interim Final Rule from CBP which will permit a limited 90-day deferral of certain customs duty payments.
This duty deferral is subject to several conditions and is quite limited in scope. Depending on the means by which your company makes duty deposits, it may also require action today (by 11:59 pm ET, Monday, April 20) in order to take advantage of the deferral.
To help you quickly assess whether or not this might be a useful opportunity for achieving additional liquidity for your company, we set out below (1) the conditions for eligibility, (2) key limitations on the deferral opportunity, and (3) where you can find more information.
Are We Eligible?
To be eligible for duty deferral:
- an importer’s operations 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, gross receipts for such importer for either March 13-31, 2020 or April 2020 are less than 60 percent of the gross receipts for the comparable period in 2019.
No documentation needs to be filed with CBP to claim this deferral, but an importer claiming relief must maintain documentation establishing the eligibility for relief.
A few observations and recommendations regarding the eligibility determination:
- There is no requirement that the government order curtailing operations have been issued by a U.S. authority (federal, state or local), meaning that orders from non-U.S. authorities limiting business operations would be sufficient to satisfy that eligibility requirement.
- The relevant business entity for measuring the reduction in gross receipts is the U.S. importer of record.
- A reduction in gross receipts of sufficient size in either period (March 13-31, 2020 or April 2020) is sufficient basis for claiming the duty deferral opportunity for the entire period (e.g., for any entries filed in March or April 2020).
- To calculate the reduction in gross receipts for April 2020 (which is not yet complete), we recommend using the best data presently available to the Company.
What Are the Key Limitations?
Duty deferral is:
- only available for consumption or warehouse withdrawal entries filed in March or April 2020.
- not available for any such entry where duty payment has already been made as of April 19, 2020 (i.e., duty refunds are not available).
- not available for any entry which also contains merchandise subject to AD/CVD, Section 301 duties (e.g., on goods from China), Section 201 duties (safeguards), or Section 232 duties (e.g., on aluminum & steel).
CBP contemplates that companies importing some merchandise subject to Section 301 duties, and other merchandise not subject to Section 301 duties might split shipments and file separate entries, to take advantage of duty deferral for goods not subject to Section 301 duties. However, this will only be possible for March and April 2020 entries where duty payment has not already been made.
NOTE: For importers which deposit duties according to Periodic Monthly Statements (PMS), any adjustments to the April PMS must be made prior to 11:59 pm ET on Monday, April 20, 2020.
Where Can I Find More Information?
For ease of reference, the relevant legal documents can be found at the following links.
For purposes of claiming the duty deferral, the most important documents are the CSMS messages:
- Executive Order: https://www.whitehouse.gov/presidential-actions/executive-order-national-emergency-authority-temporarily-extend-deadlines-certain-estimated-payments/
- Interim Final Rule (new Regulations): https://s3.amazonaws.com/public-inspection.federalregister.gov/2020-08618.pdf
- CSMS 42421561: https://content.govdelivery.com/bulletins/gd/USDHSCBP-2874d39
- CSMS 42423171: https://content.govdelivery.com/bulletins/gd/USDHSCBP-2875383
If you have further questions about this development or how it applies to your specific situation, please contact John Foote.
