On April 19, 2020, President Trump issued an Executive Order (E.O.) on “National Emergency Authority to Temporarily Extend Deadlines for Certain Estimated Payments” directing the Secretary of the Treasury, in consultation with the Secretary of Homeland Security, to take appropriate action to temporarily extend deadlines “for importers suffering significant financial hardship because of COVID-19.” U.S. Customs and Border Protection (CBP) and the Department of the Treasury issued an interim final rule (IFR) the same day amending CBP regulations (19 C.F.R. part 24) to implement the E.O.
The IFR allows qualifying importers to defer payment of certain estimated duties, taxes and/or fees for 90 calendar days with respect to eligible merchandise entered into or withdrawn from warehouse for consumption (including entries for consumption from a Foreign Trade Zone) in March or April 2020. No interest will accrue for the postponed payment.
To qualify for the temporary payment postponement for eligible merchandise, an importer of record must demonstrate a “significant financial hardship.” An importer will be considered to have a significant financial hardship if (i) its operations were 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 (ii) 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. The importer is not required to file any additional documentation with CBP to be eligible for temporary relief, but it must maintain adequate documentation in case CBP requests a review.
The IFR contains a number of key limitations. Notably, the temporary postponement does not apply to merchandise subject to additional duties beyond the standard rate in the US Harmonized Tariff Schedule, including:
- antidumping duties;
- countervailing duties;
- “Section 232” duties,1 such as those currently applicable to imports of steel and aluminum;
- “Section 201” duties,2 such as those currently applicable to imports of solar panels; and
- “Section 301” duties,3 such as those currently applicable to imports of Chinese-origin goods.
If a particular entry contains both eligible and ineligible merchandise, the entire entry will not be eligible for the 90-day postponed payment. In such circumstances, importers should file separate entries for the two categories of merchandise.
Other limitations also apply. For example, the temporary postponement does not cover deadlines for the payment of other debts to CBP, including but not limited to deadlines for the payment of bills for duties, taxes, fees and interest determined to be due upon liquidation or reliquidation, or deadlines for the payment of any penalty or liquidated damages due to CBP. The IFR also indicates that CBP will not return deposits of estimated duties, taxes and/or fees that have already been paid.
Although the IFR is effective as of April 20, CBP is accepting comments on it through May 20, 2020.
CBP issued the following two notices on April 19 offering further guidance on the temporary postponement:
- CSMS #42423171: COVID-19—90 Day Postponement of Payment for the Deposit of Certain Estimated Duties, Taxes, and Fees. This notice summarizes in detail eligibility requirements for postponement of import payments, as well as information on making payments.
- CSMS #42421561: COVID-19—Payment Instructions for 90-Day Postponement of Payment for the Deposit of Certain Estimated Duties, Taxes, and Fees. This notice expands on the payment instructions provided in CSMS #42423171.
WilmerHale continues to monitor these developments closely. The firm has also assembled a task force of legal authorities across the wide array of disciplines implicated by the outbreak of COVID-19, which stands ready to assist clients as they develop legal and operational plans and protocols.