TRADE IN THE TIME OF CORONAVIRUS: UPDATE #6

At Neville Peterson LLP, we’re fully functional in remote working mode, ready to assist our clients, and openly fretting about the fate of so many unwatered plants in offices across the nation. But trade rolls on, with fits and starts, in these challenging times, and we’re striving to keep the trade community advised of news that affects them.

USMCA To Become Effective July 1, 2020: The United States Trade Representative has announced that the United States-Canada-Mexico Agreement (USMCA) will enter into force on July 1, 2020. Customs and Border Protection has issued a set of “Interim Instructions” which, it indicates, will govern the making of claims for USMCA preferential tariff treatment until final regulations can be adopted. USMCA gives the signatory countries up to one year after entry into force to adopt final regulations. It is unclear whether CBP intends to use its “Interim Instructions” during that period, which would appear to be a violation of Administrative Procedure Act (APA) requirements.

CBP’s “Interim Instructions” contain a number of surprises. For example, it indicates that Customs will continue to use the “NAFTA Marking Rules” codified at 19 C.F.R.§  102.20-21 to determine the origin, for marking purposes, of goods imported into the United States from Canada and Mexico. USMCA does not contain marking rules, and it was assumed that Canada and Mexico would have the origin of their goods determined by the traditional  rule of  “substantial  transformation”. CBP appears to have other ideas.

In addition, CBP’s “Interim Instructions” contain the data requirements for issuing USMCA certifications of origin, which can be in any form, including a statement on invoices or shipping papers. The number of data elements required for proper certification appear to preclude putting the information on a typical invoice form containing other data. The rules also contain documentation retention requirements for parties issuing USMCA rules of origin.

CBP’s Interim Instructions indicate that the HTS will be amended to contain a Special Program Indicator “S” for USMCA, but that the indicator will appear only in tariff items which carry a rate of duty. In addition, the agency indicates that USMCA will allow claims for waiver of Merchandise Processing Fees, but only if this treatment is claimed at the time of entry. MPF exemptions cannot be claimed in a post-entry request, according to the agency.

There are serious concerns about whether industry, which needs to restart many operations following the COVID-19 pandemic, will be able to adjust to new USMCA operations by July 1, 2020. Numerous groups, including Customs’ Commercial Operations Advisory Committee (COAC), have urged that implementation be delayed.

USTR has also published a rule soliciting applications from North American auto makers for leave to use the alternate timeline for coming into compliance with USMCA’s complex new automotive rules of origin.

USTR also released another round of exclusions of products from Section 301 tariffs on Chinese goods, but as of this writing, has not issued any new exemptions in response to its recent request for comments on possible COVID-19 related exclusions.

United States Customs and Border Protection has posted on its website a Frequently Asked Questions (FAQ) document regarding the recently announced ninety-day postponement of duty payments for goods entered during the months of March and April. There are calls from importers and trade groups to extend the ninety-day payment suspension, and to take other actions to provide relief to business during this time.

The United States International Trade Commission has recently delivered to Congress  a Section 332 Investigation Report (Investigation 332-576) regarding COVID-19 Related Goods – U.S. Imports and Tariffs. The study is intended to provide Congress and the Administration with additional information regarding trade flows for goods deemed essential to the COVID-19 response. The ITC will continue to provide data on its website regarding COVID-19 related goods at least through June 20, 2020.

The Department of Justice, Antitrust Division has taken the unusual step of wading into a newly initiated set of antidumping and countervailing duty investigations regarding Mattresses from Cambodia, China, Indonesia, Malaysia, Serbia, Thailand, Turkey and Vietnam. In a brief filed with the United States International Trade Commission, the Antitrust Division argues that new antidumping and countervailing duties could increase the price of mattresses, making it harder for hospitals to increase the number of beds they have available for patients with COVID-19. Noting that domestic producers were seeking antidumping rates between 48 and 1000 percent, DOJ asserted that “indiscriminately imposing equivalent antidumping or countervailing duties could significantly increase mattress prices for consumers in the United States and, more importantly, could potentially affect the supply of mattresses needed in hospitals and other healthcare facilities.” The International Sleep Products Association (ISPA) which filed the trade petitions, filed a response brief noting that states have shuttered most retail mattress stores nationwide and idled most mattress manufacturers, asserting that demand for mattresses has actually dropped and domestic producers, when they restart capacity, can supply mattresses to meet COVID-19 needs. The ITC’s preliminary determination is due May 15, 2020.

The Commercial Operations Advisory Committee, which advices Customs and Border Protection, held a virtual meeting with senior CBP officials last week, and presented a White Paper on the agency’s response to COVID-19. The COAC urged that Customs should relax its collection of duties, fees and taxes to the greatest extent possible, to ensure the economic health and safety of the trade and logistics industry. It urged CBP and partner government agencies to align with the IRS to provide an industry-wide ninety (90) day delay or deferral on all duties, taxes and fees, to waive or compromise past due payments of duties, taxes, fees and liquidated damages, in order to allow stricken companies to remain financially solvent.

COAC also suggested that CBP should not charge interest on supplemental duty bills for at least six (6) months, and should suspend demands to terminate and replace bonds based on insufficiency calculations. The Committee also recommended that CBP’s National Finance Center continue to process and accelerate refunds associated with trade remedy tariffs, drawback entries, protests, and post-summary corrections.

Another priority for the COAC is to  have Customs and PGAs develop a unified COVID-19 communication strategy, and to ensure that requests for information, notices of action and other post-entry (including audit) communications should be provided not only by ACE and regular mail but also email to points of contact listed in the ACE portal, as well as to brokers and sureties, to ensure that they are received. The agencies should also send enforcement actions and decisions via email, grant extensions to respond to inquiries and claims, and extend the period for importers to submit additional information in support of a protest. The COAC also suggests that CBP should limit its inspection activities and exercise discretion to situations where non-compliance does not pose a threat to consumer health, safety or welfare.

For help regarding these or other trade topics in these challenging times, please contact a Neville Peterson LLP professional.