The Treasury on Sunday evening announced the temporary postponement of certain tariff payments for three months in a bid to help ease supply chain strains during the pandemic.
The move – pursuant to an executive order from Trump – will “provide importers who have faced a significant financial hardship due to the outbreak, with the option for a 90-day deferment period on the payment of duties, taxes, and fees”, the official announcement reads.
This was expected and has been in the rumor mill for nearly three weeks. It does not apply to duties on Chinese goods, metals or any enforcement actions. Here are the key passages from the interim rule:
Due to the COVID-19 pandemic, local, state and national restrictions have forced the closure of offices of the importing community and those businesses have limited their operations and procedures. Many importers of record will be receiving diminished or no revenue during this time while still incurring costs, including the duties, taxes, and fees associated with imported merchandise for their clients and supply chains. Aggravating matters, many major retail chains and other businesses are closing for business–either voluntarily in response to the President’s call or following state or local government requirements.
[…]
This temporary postponement also does not apply to any entry, or withdrawal from warehouse, for consumption, or any deposit of estimated duties, taxes, or fees for the entry, or withdrawal from warehouse, for consumption, where the entry summary includes any merchandise subject to one or more of the following: antidumping duties (assessed pursuant to 19 U.S.C. 1673 et seq.), countervailing duties (assessed pursuant to 19 U.S.C. 1671 et seq.), duties assessed pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862), duties assessed pursuant to Section 201 of the Trade Act of 1974 (19 U.S.C. 2251 et seq.), and duties assessed pursuant to Section 301 of the Trade Act of 1974 (19 U.S.C. 2411 et seq.). Accordingly, CBP anticipates that importers will file separate entries when a shipment contains both merchandise that is eligible for temporary postponement and merchandise that is ineligible (because of the above-specified trade remedies).
In other words, this isn’t Trump calling off the trade war and isn’t a reason to buy stocks.
Importers will need to prove they’re experiencing a “significant financial hardship” to qualify, where that means operations have been fully or partially suspended on orders from government officials in connection with COVID-19 containment protocols.
An importer must also show that its gross receipts for March 13-31 or for the month of April are less than 60% of what they were for the comparable period in 2019.
“Companies that import goods pushed for temporary relief from the duty payments as the economic impact of the coronavirus outbreak caused cash flow issues for many”, Bloomberg wrote earlier this month, essentially breaking the news weeks prior to the official announcement. “The proposal sparked immediate push back from domestic industry associations and unions like the United Steelworkers as well as from some people inside the White House”, the same article noted, referencing an earlier version of the proposal which was subsequently narrowed.
In late March, Bloomberg suggested the administration was considering a more comprehensive tariff relief plan. Peter Navarro called that nonsense, or at least as it related (or didn’t relate) to China. “This is fake news”, he told Reuters at the time. “The Trump tariffs have been an important defense against China’s economic aggression and we are stronger today because they exist”.
Trump has generally stuck to the notion that China hasn’t asked for (and won’t receive) tariff relief in connection with the pandemic. That said, some of the language in the “phase one” trade accord seems to admit of exceptions for exigent circumstances, and there are pressing questions about China’s capacity to live up to its promises considering the acute strain on the global economy.
In any event, that’s neither here nor there on Monday, as the new order doesn’t apply to duties on Beijing.
One thing that is absolutely clear from the order is that it is, in fact, importers who pay these tariffs, not China, and not anyone else. That won’t stop Trump from insisting Xi is still writing giant checks to the US Treasury, though.
