Importers, like many other businesses, have faced a severe decline in revenues in the last three months. This decline is due, in large part, to the federal, state, and national restrictions placed on imports. Additionally, due to contractual obligations to purchase certain levels of product, many importers are still required to accept shipment from manufacturers, regardless of the lack of demand for these goods in the marketplace or the lack of warehouse space to store such goods. These problems are then exacerbated by the fact that, even if they are able to receive and ship the goods, demand has substantially disappeared due to pervasive legislation that mandated retail store closures. So, while importers' revenues are rapidly declining, they are still incurring significant costs, such as government mandated import fees and taxes, causing many of them to experience hardship and start to worry whether they will survive the pandemic.
On April 20, 2020, in an attempt to remedy some of the financial hardships importers have faced in the months of March and April, U.S. Customs and Border Protection ("CBP") and the U.S. Treasury Department have jointly issued regulations allowing for an extension to pay certain fees and taxes that would otherwise be payable upon entrance or withdrawal from the United States. If an importer can show they are facing significant financial hardship, they will be entitled to a 90 day postponement of payment of estimated duties, taxes, and fees otherwise required as of the date goods enter into (or are withdrawn from) the U.S. Financial hardship, as defined in the amended regulations, means that an importer, must have had their operations fully or partially suspended during March or April of 2020, such that, gross receipts in the second half of March or April of 2020 "are less than 60% of the gross receipts for the comparable period in 2019." Businesses seeking to take advantage of this postponement are not required to file any application or additional form, but should be sure they are maintaining detailed books and records and can show they meet the financial hardship threshold if ever called into question. The regulations also state that no interest will accrue on the estimated duties, taxes, and fees that importers choose to temporarily postpone. It should be noted, there are several specifically enumerated fees and tariffs that are not allowed to be postponed under these regulations.
These new regulations come after several other pieces of legislation, both federal and state, aimed to help businesses maintain cash flow and stay operational during this crisis. It is important to look at all of the new legislation and determine what the best plan of action for your business should be.
So, whether you would like some help determining whether your import business meets the definition of financial hardship or you would like to discuss the impact of COVID-19 has had on your business more broadly, we would love to hear from you!
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.