Written by Susan Kohn Ross

Update 4/23/20:
The official Federal Register notice authorizing the duty payment deferral option has been published – please see here. The comment deadline expires on May 20, 2020.

Update 4/20/20:
We noted in our Alert below that CBP stated the decision about whether or not to defer payment of duty had to be made by 11:59 PM today. CBP has now clarified that is 11:59 PM Eastern Time, and the deadline refers to the April Periodic Monthly Statement.

Also, CBP is now saying if the 301 duty exclusion covers the entire entry, the entry is eligible for the duty payment deferral option.

Original Alert:

Despite statements discounting the possibility, saner heads have prevailed and published late yesterday was an Executive Order issued permitting the Secretary of the Treasury to adjust the deadlines related to payment of duty. Executive Order re Duty Payment Deferral.  On that basis, CBP announced a 90 day postponement of duty payment is possible. First, in CSMS 42423171, CBP made clear the option to postpone duty payment for 90 days exists for many entries filed in March and April 2020. However, if the entry involves antidumping duty, countervailing duty, and/or Section 201, 232 or 301 duties, duty payment deferral is not available. While not obvious from the publications available to date, if your goods are subject to a 301 tariff but you have an exclusion, CBP has verbally advised you are not eligible for duty payment deferral. Many more questions are likely and CBP is holding a second briefing with the trade community this morning. The first such briefing took place yesterday evening. During that briefing, CBP indicated the duty deferral decision had to be made before 11:59 p.m. tonight. This is understood to refer to duty payments due today, April 20, 2020. Make sure to consult with your customs broker, but do not be surprised if many are unsure about the application of this newly announced program, due to the timing of its rollout.

To qualify for duty deferral, importers will not need to make any special application, but rather must maintain records to show financial hardship, which is defined as the importer’s operation being fully or partially suspended during March or April 2020 due to orders from a “competent governmental authority limiting commerce, travel, or group meetings due to COVID-19,” and that, as a result, the importer’s gross receipts from March 13, 2020 onward are “less than 60 percent of the gross receipts for the comparable period in 2019.” CBP has made clear it reserves the right to review such supporting documents “at a future date” for compliance reasons. This date range was further clarified in the pre-publication Federal Register notice which was later posted. See more details below.

So, beside making sure your financial records are in order, importers will now want to maintain as part of their normal books and records copies of all the shelter in place and similar orders issued by the various levels of government with jurisdiction over their locality. It would be prudent to include such orders impacting where the business is located, but also the surrounding areas where the workforce resides.

Assuming importers have the necessary supporting documents, no interest, penalty, liquidated damages or other sanction will be imposed. However, if there are other debts due to CBP (e.g. payment of fines), those deadlines remain unchanged.

Conceding the serious impact of the virus on business operations of all sorts, CBP has also said if your entry has not yet been filed, and it consists of some goods which are not eligible for duty payment deferral and some goods which are, the importer may split their entry as per 19 C.F.R. 141.52 which provides:

If the Center director is satisfied that there will be no prejudice to: Import admissibility enforcement efforts; the revenue; and the efficient conduct of Customs business, separate entries may be made for different portions of all merchandise arriving on one vessel or vehicle and consigned to one consignee under any of the following circumstances:

(a) Each portion of a consolidated shipment addressed to one consignee for various ultimate consignees may be entered separately under the procedure set forth in § 141.54.

(b) One or more of the enclosed packages in a packaged package may be entered separately under any appropriate form of formal or informal entry. No entry is required for an enclosed package which contains merchandise unconditionally free of duty and not exceeding $250 in value. A packed package is an outer package in which are contained inner packages addressed for delivery to two or more different persons, as described in section 484(f), Tariff Act of 1930, as amended (19 U.S.C. 1484(f)). Each outer container shall be marked to indicate that it is a packed package.

(c) The consignee desires to enter different portions under different forms of entry, for transportation to different ports of entry, or for warehousing in separate warehouses.

(d) Appraisement is being withheld upon merchandise of the class or kind for which a separate entry is tendered.

(e) The several portions of the consignment for which separate entries are tendered are covered by separate bills of lading.

(f) The consignment consists of different classes of merchandise which are to be processed by different Customs commodity specialist teams.

(g) The consignment contains merchandise subject to entry under a bond given to assure accounting for final disposition, such as a temporary importation under bond.

(h) The consignment consists of different importations which arrived under a consolidated entry for immediate transportation made pursuant to § 18.11(g) of this chapter.

(i) A special application is submitted to the Commissioner of Customs with the recommendation of the Center director concerned and is approved by the Commissioner.

The remainder of this CSMS provides examples of the relevant timeframes. For example, a single pay basis or daily statement may be postponed up to 90 days from due date, so if the original due date is April 30, 2020, the 90 days expires on July 29, 2020. When it comes to IRS taxes paid on a deferred basis, the timing is three (3) months, so April 29, 2020 can become July 29, 2020 or May 14, 2020 might instead be August 14, 2020. Regarding a Periodic Monthly Statement or PMS, the timing is three (3) months defined by the 15th working day of the third month, e.g. April 21, 2020 could become July 22, 2020 and May 21, 2020 extends to August 21, 2020. CBP also issued a reminder that it is up to importers (and their brokers) to calculate when their payments are due. CBP will not revise any due dates on its own initiative.

CBP is also updating its system (ACE SU) so there is more flexibility in removing entries from PMS, to include single pay transactions and Remote Location Filing entries.

A few minutes later, CBP issued CSMS 42421561 which expanded on these payment illustrations and also discussed ACH payments. This second CSMS makes clear the 7501 itself must be filed under the original Periodic Daily Statement timeline, and the ACH authorization submitted before the PMS prints, pointing out the default is the 11th working day of the month. CBP also added that under “certain conditions,” importers or filers may come to realize they do not want their account debited the same day they transmit authorization. If that happens, importers may negate the authorization unless already processed. Importers were also cautioned to make sure they are properly coordinating their efforts because if their banks refuse payment, that triggers another set of headaches and consequences. Further, CBP made clear that any payments already made are not subject to refund.

Shortly thereafter, the Federal Register pre-publication edition was made publicly available. It contains the newly proposed 19 C.F.R. 24.1a. FR re duty deferral – pre-publication version. It makes clear, as noted above, the entries eligible were filed between March 1, 2020 and April 30, 2020. No doubt more clarity will be available later today once a further industry briefing from CBP occurs. Questions can be referred to otentrysummary@cbp.dhs.gov and tradeevents@dhs.cbp.gov. More clarity is also likely to come from notices posted on the CBP website at https://www.cbp.gov/tags/covid-19 and through the CSMS or Cargo Systems Messaging Service. Stay tuned for further developments with this fast breaking and welcome relief.