On April 20, 2020, following an April 19 executive order issued by President Trump, the Secretary of Treasury and U.S. Customs and Border Protection (CBP) announced a 90-day postponement of the payment of certain estimated duties, taxes, and fees for importers experiencing a significant financial hardship because of the coronavirus disease (COVID-19). Importantly, as explained below, not all duties and tariffs may be deferred and not all importers are eligible. Therefore, you should carefully examine whether your circumstances meet the requirements and make sense for your business.
What Payments Are Excluded?
First, importers should be aware of the rather broad scope of import entries excluded from the postponement. In particular, excluded from the postponement are any entries, or withdrawals from warehouse, for consumption, where the entry summary also includes merchandise subject to one or more of the following:
- Antidumping duties;
- Countervailing duties;
- Duties assessed pursuant to Section 232 of the Trade Expansion Act of 1962;
- Duties assessed pursuant to Section 201 of the Trade Act of 1974; and
- Duties assessed pursuant to Section 301 of the Trade Act of 1974.
To take advantage of the 90-day postponement period, importers/filers must ensure that their entries do not include any lines covering merchandise that is ineligible for the postponed payment. CBP notes that "[i]f an entry is filed with merchandise subject to antidumping duties, AND merchandise not subject to antidumping duties, the entire entry will NOT be eligible for the 90-day postponed payment." As an alternative, CBP is authorizing filers/importer to submit separate entries for mixed shipments. Thus, if a single shipment entry has both lines of merchandise subject to countervailing duties and lines of merchandise not subject to countervailing duties, the filer/importer should submit separate entries for the two classes of merchandise. Importers/filers will be responsible for scheduling payments and should be aware that CBP will not be adjusting statement dates, notwithstanding the potential applicability of this 90-day postponement.
Can You Demonstrate the Necessary Hardship?
In order to qualify, your business must have suffered significant financial hardship as a result of the COVID-19 pandemic, which CBP defines as follows:
. . . if the operation of such importer is fully or partially suspended during March 2020 or April 2020 due to orders from a competent governmental authority limiting commerce, travel, or group meetings due to 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 percent of the gross receipts for the comparable period in 2019.
Given this, importers will need to undertake a financial review of their business to see if their year-on-year change qualifies for the potential relief.
Understanding the Timing.
As to timing, the temporary postponement applies to certain formal entries of merchandise entered, or withdrawn from warehouse, for consumption (including entries for consumption from a Foreign Trade Zone) in March 2020 or April 2020. According to agency instructions, however, CBP will not return deposits of estimated duties, taxes, and fees that have already been paid.
CBP provides the following guidance on payment time frames in light of the postponement:
Estimated duties, taxes, and fees paid on single pay basis or via Daily Statement may be postponed up to 90 days from the payment due date.
Example:
Original Due Date |
90-Day Postponement |
|
April 30, 2020 |
July 29, 2020 |
Estimated Internal Revenue Tax paid via the deferred tax schedule may be postponed up to three months from the payment due date.
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.
Example:
Original Due Date |
3-Month Postponement |
|
April 21, 2020 |
July 22, 2020 |
|
May 21, 2020 |
August 21, 2020 |
No Interest, No Penalties.
CBP notes that no interest will accrue for the postponed duties, taxes, and fees payments during the 90-day postponement period, and no penalty, liquidated damages, or other sanctions will be imposed for the postponed payments of the deposit of estimated duties, taxes, and fees in accordance with this temporary postponement.
To take advantage of this postponement, an eligible importer does not need to file separate documentation with CBP but must maintain documentation as part of its books and records establishing that it meets the requirements for relief. CBP may also conduct a review of the documentation at a future date to ensure compliance with the requirements.
* * *
While the scope of the postponement contains several significant exclusions, the postponement may offer a significant opportunity for importers and businesses navigating the financial hardships created by the global COVID-19 pandemic. Please contact a member of Venable's International Trade team if you have any questions or need further guidance on how to ensure you or your company can make the most of this opportunity.