Much Unclear in CBP's Duty Deferral Plans as Individual Approvals Begin

Much about CBP's efforts to temporarily relieve financial pressure on importers through customs duty payment deferrals remains unclear, though is likely to be widely appreciated by industry, industry lawyers said. CBP announced plans to consider duty payment extensions on a case-by-case basis and it is said to be considering broader measures (see 2003200038). The broader duty deferrals, which could be detailed in an executive order or the Federal Register, are seen as similar to the tax filing deadline extension recently announced by the Internal Revenue Service.

CBP is already approving requests of additional days for payment, according to an update to members of the Cheese Importers Association of America. The CIAA said CBP is replying to such requests by saying “Yes, you are approved for additional days for payment due to the COVID - 19 emergency. Please note we are working on a future message that may provide an additional timeframe for payment.” Although CBP hasn't said anything official yet about the time frame, the CIAA said that “we are advised that for the time being Customs is granting an additional 10 days to specifically approved companies.” CBP didn't comment.

While CBP also hasn't said what information should be provided in the extension requests, the CIAA suggests including the “exact company name and their Importer of Record (IOR) number with the request.” It may also make sense to provide a “brief statement specifying the company's need for the additional time requested and the harm that the company is currently facing,” the association said. The requests should be sent to OTentrysummary@cbp.dhs.gov, it said.

The agency will still be generating “liquidated damages notices for nonpayment and late payment of duties, fees and other amounts owing,” because the CBP system automatically creates such notices, the CIAA said. “We understand that providing the CBP authorization message to the approved party should be sufficient to cancel any such notices in their entirety (assuming that the amounts owing were fully paid within the extension period).”

CBP's case-by-case approach appears to be based on footing similar to the agency's ability to allow for “snow days,” one industry lawyer said. While “snow days” are typically used by CBP as an administrative measure when something is actually impeding the collection of duties, such as a natural disaster or system outage, that doesn't seem to be the case here, the lawyer said, so there's some question as to what authority is at work. “It remains to be seen how customs will implement this“ but the CSMS message announcing the request process indicates “someone at Treasury has looked at it and said 'OK, that's fine.'“

There is an existing process for the government to “compromise duties” based on a company's inability to pay, but its unclear whether that process will be invoked as part of this duty deferral effort, the lawyer said. The lawyer said he hadn't yet done a full legal analysis, but “I think behind all this is lurking some possible, rarely used, legal authority,” that may allow the agencies to get around the fiscal requirements around the duty collections, he said.

Barnes Richardson lawyer Larry Friedman also said the legal basis isn't clear and that “delays in payments are typically done as part of a settlement agreement to ensure collections when CBP might otherwise not be able to collect anything.” One potential legal issue “is whether the change in payment terms impacts the enforceability of the bond,” he said. “Generally, changes in potential liability for a surety create defenses to the surety’s liability. I am not sure whether the change in payment term is meaningful, but it should be considered.”