U.S. Customs and Border Protection Grants Temporary Duty Deferral on Imports

We have great news for importers with cash flow issues…

Today the Secretary of the Treasury and the U.S. Customs and Border Protection (CBP), under 19 U.S.C. 1318(a), authorized importers to temporarily postpone certain estimated duties, taxes, and fees associated with their imports. This temporary postponement is for 90 days and for duties owed. Under this new rule, importers who can have suffered a significant hardship now have 90 days to pay their duties, taxes, and fees that they would ordinarily be obligated to pay.

COVID-19 and the Pandemic’s Effect on Importers

Due to the COVID-19 pandemic, many importers are undergoing significant financial hardship with operations fully or partially suspended due to governmental authorities imposing limits on commerce, travel, or group meetings. These local, state and national restrictions have forced many importers to close their offices while others now limited their operations and procedures.

Aggravating matters, many major retail chains and other businesses are closing for business—either voluntarily in response to the President’s call or following state or local government requirements. Many importers are also having difficulty authorizing payments for duties, taxes, and fees on imported merchandise. Moreover, importer employees are having difficulty getting to work or are having technical issues with working remotely, making it difficult to contact the individuals responsible for the release of funds, which is leading to delays in payments of duties, taxes, and fees.

Coupled with the fact that these importers are still incurring costs, including the duties, taxes, and fees associated with imported merchandise for their clients and supply chains, it’s clear that many importers are experiencing a disproportionate amount of hardship as a result of the COVID-19 pandemic. Indeed, many importers are seeing nominal amounts of revenue come in the door or no revenue come in at all. As a result, CBP issues this emergency action to help importers who have become impacted by the COVID-19 pandemic.

Defining a Significant Financial Hardship

To qualify for this temporary postponement, an importer must demonstrate a significant financial hardship. CBP defines a significant financial hardship when:

1. the operation of such importer is 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
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.”

The above requirements impacted importers may seem narrow, but it’s important to note the government provides no guidance on who or what is considered a “competent governmental authority”, which means this new program is extremely broad. Moreover, CBP is not asking for additional information justifying an importers position. Instead, CBP is simply asking that eligible importer maintain documentation as part of its books and records establishing that it meets the requirements for relief.

Conclusion

This emergency action is being taken in response to the extraordinary challenges facing U.S. individuals and businesses during the COVID-19 national emergency (which significantly affects the trade community), and it’s hard to imagine an importer right now who couldn’t qualify for this program.