Fashion Intel & Analysis
During the April 15th meeting of the Commercial Customs Operations Advisory Committee (COAC), the committee released their recommendation that the entry-into-force date for the U.S.-Mexico-Canada Agreement (USMCA) should be delayed until January 1, 2021. “COAC recommends that CBP, the USTR and its USMCA partners should delay USMCA’s entry into force until no earlier than January 1, 2021 and provide a transition or implementation period for the year where NAFTA qualifying goods with appropriate certificates of origin will be considered to comply under the USMCA.” Currently the Administration is still hoping to implement the agreement as early as June 1st.
The process to implement the duty deferral program is extremely complicated, as you noticed when you reviewed the information released by Customs and Border Protection on Sunday. Following is a recap of the outlines of the program. USFIA will provide additional information as we receive it.
Key Elements in the Temporary Duty Deferral Program
Duties can be deferred for entries filed during March or April. This applies for entry for consumption or withdrawal from warehouse. The deferral is for a period of 90 days from the date that the deposit would otherwise have been due but for this emergency action. No interest will accrue during the 90-day period for estimated duties, taxes, and fees. So for example, payments that were due on April 21 will now be due on July 22nd.
Imports that are subject to additional tariffs under the 301 investigations, 232 investigations or anti-dumping and countervailing duties are not eligible for deferral. Imports that have received a Product Exclusion from USTR are eligible for duty deferral. Unfortunately this provisions means that imports from China that are subject to the 301 tariff covered by List 3 and List 4A, and imports from the EU that are subject to 301 tariffs, are not eligible for the duty deferral program. Products from China on List 4B are eligible.
Shipments that commingle eligible and ineligible products do not qualify for the deferment. However, for new shipments only separate entries will be allowed.
Criteria to defer duties:
Companies must have documentation to show “significant financial hardship” which is defined as:
- Operations must be fully or partially suspended during March or April 2020
- Gross receipts of the importer for March 13-31, 2020 or April 2020 are less than 60 percent of the gross receipts for the comparable period in 2019.
Importers are not asked to submit any additional information at this time, but they are asked to maintain documentation to prove this information as part of their reasonable care requirements. USFIA suggests that public companies should ensure SEC public filings support the claim of financial hardship.
The legal entity to claim deferral is based on the Importer of Record (IOR) information on the entry documentation.
Deadline of midnight tonight to pull any entries scheduled for April monthly statement payment that are eligible for this temporary duty deferral. These entries can be moved to the July monthly statement.
Two new reports take a look at the impact COVID-19 is having on the apparel and footwear industries around the globe. The investment research firm CFRA conducted an Industry Survey of Retail. The survey found the COVID-19 crisis sped up a trend that the retail sector had seen in late 2019, with U.S. discretionary consumer spending is slowing down. The survey estimates that 15,000 stores in the U.S. could permanently close in 2020, which is almost double the rate in 2019. A sectoral brief from the International Labour Organization (ILO) looks at the impact of store closures and production disruption around the globe. Apparel and footwear manufacturers around the world have seen high rates of order cancellations as retailers and brands try to deal with store closures and decreased demand. As a result, many Asian countries have seen a sharp rise in unemployment in the garment production sector. Governments around the globe have stepped into to help workers in crisis but the ILO urges the business community to engage in a multilateral approach to relief efforts.
USFIA joined with 16 industry groups to sign onto a letter from the GSP Coalition asking the Trump Administration to delay the suspension of GSP duty-free treatment for certain products from Thailand. Under the Generalized System of Preferences (GSP) program, some imports from developing countries are eligible for duty-free access to the U.S. market. Most apparel and footwear products are not eligible for GSP. The suspension is set to take effect on April 25th but the coalition proposes a delay for 6 months or until the current economic emergency ends. The GSP Coalition cites economic deterioration related to COVID-19 and the cost increases this would cause American employers who are "struggling to maintain employment levels in response shutdowns and falling demand around the world. If GSP benefits from Thailand are suspended, products related to COVID-19 relief could be subject to higher tariffs including parts for hospital laundry equipment, single-use footwear covers, pumps, compression materials, and plastic resins and other components used to make medical equipment.