U.S. Suspends Duty Payments on Certain Merchandise - Offering Temporary Relief for Some Importers

Kelley Drye Client Advisory

In response to growing calls of concern from the business community, Members of Congress and even from some within the Administration, President Trump issued an Executive Order on April 19 authorizing temporary relief of the payment of certain duties, interest and fees associated with imported merchandise.

This limited order supersedes actions previously taken, and later withdrawn, by Customs and Border Protection (CBP) to provide temporary relief on the payment of a broader category of duties that conflicted with the President’s trade policy and drew sharp rebuke from the Oval Office.  Importers struggling with liquidity issues amid the COVID-19 pandemic welcomed the announcement; however, some import-sensitive manufacturing industries and unions  were critical of the decision, expressing concern that even the scaled-back duty deferral conflicts with efforts to rebuild American manufacturing and support Buy American” initiatives during these extraordinary times.

The order specifically calls for 90 days of deferral for regular tariffs only, also known as most-favored-nation” (MFN) tariffs, for importers who can establish that they are experiencing significant financial hardship related to the COVID-19 outbreak.  The deferral does not apply to tariffs imposed for remedial purposes, including the Section 232 steel and aluminum tariffs, Section 201 and Section 301 tariffs (applicable to China and certain EU members), or antidumping and countervailing duty tariffs.

According to a Temporary Final Rule drafted jointly by CBP and the Department of the Treasury and scheduled for publication in the Federal Register on April 22, as well as CBP guidance issued on April 19, this temporary postponement applies to formal entries of merchandise entered in March or April 2020.  CBP will not return deposits of estimated duties, taxes, and fees that have already been paid.  Furthermore, CBP will consider an importer to have experienced significant financial hardship if:

  1. the importer’s operations are either 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
  2. 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.

Importantly, the guidance clarifies that no interest will accrue – and that no penalty, liquidated damages or other sanctions will be imposed – for the postponed payment of such estimated duties, taxes, and fees during the 90-day deferral period.  CBP addresses other related issues in a FAQ.

We will continue to monitor this development and others related to supply chain management challenges presented by the global pandemic.  For additional information, please contact Jennifer McCadney or Maggie Crosswy.