International Trade Roundup: PPE Export Exemptions, Import Duty Postponement and Border Closures
PPE Export Exemptions
On April 21, 2020, FEMA published a list of 10 generally applicable exceptions authorizing the export of PPE (the “PPE Exemptions”).1 The PPE Exemptions amend FEMA’s April 10, 2020, temporary rule, which prohibits the export of certain PPE including N95 respirators, facemasks and protective gloves (“covered PPE”) unless FEMA has provided explicit approval for the export (the “FEMA Rule”). CBP is required to seize all intended exports of PPE2 pending FEMA’s determination on whether to allow the export, deny the export, or issue a “rated order” to procure the PPE under the U.S. government’s authority pursuant to the Defense Production Act. For additional information on the FEMA Rule, see our earlier OnPoint here.
Now, under the rule amendment, provided that an export qualifies for one of the 10 PPE Exemptions, FEMA’s express authorization is not required for export. The PPE Exemptions are:
- Shipments to U.S. commonwealths and territories, including Guam, American Samoa, Puerto Rico, U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands (including minor outlying islands);
- Exports of covered materials by non-profit or non-governmental organizations that are solely for donation to foreign charities or governments for free distribution (not sale) at their destination(s);
- Intracompany transfers of covered materials by U.S. companies from domestic facilities to company-owned or affiliated foreign facilities;
- Shipments of covered materials that are exported solely for assembly in medical kits and diagnostic testing kits destined for U.S. sale and delivery;
- Sealed, sterile medical kits and diagnostic testing kits where only a portion of the kit is made up of one or more covered materials that cannot be easily removed without damaging the kits;
- Declared diplomatic shipments from foreign embassies and consulates to their home countries. These may be shipped via intermediaries (logistics providers) but are shipped from and consigned to foreign governments;
- Shipments to overseas U.S. military addresses, foreign service posts (e.g., diplomatic post offices), and embassies;
- In-transit merchandise: shipments in transit through the United States with a foreign shipper and consignee, including shipments temporarily entered into a warehouse or temporarily admitted to a Foreign Trade Zone;
- Shipments for which the final destination is Canada or Mexico; and
- Shipments by or on behalf of the U.S. federal government, including its Military.
FEMA did not impose limitations on the quantities or value of PPE that can be exported pursuant to the PPE exemptions. However, for exemption numbers 2, 3, 4, 8 and 9,3 exporters are required to submit an attestation letter with their export documentation, certifying that the export qualifies for the exemption. The attestation letter needs to describe which exemption(s) the exporter is utilizing, provide details to FEMA and CBP showing the shipment qualifies for the stated exemption(s) and include a statement acknowledging that the submission of false information subjects the exporter to prosecution.
Notwithstanding the PPE Exemptions, CBP and FEMA continue to have the authority to seize and evaluate any export if the agencies believe the export does not qualify for an exemption, an exporter has intentionally modified its shipments to take advantage of the exemptions or is otherwise attempting to circumvent FEMA’s review authorization.
Companies interested in utilizing a PPE Exemption should ensure their entire shipment adheres to the published exemptions or they run the risk of seizure, rejection or U.S. government procurement of the goods. Letters of attestation, where required, should leave no doubt in the view of FEMA and CBP that the export qualifies for the applicable exemption. In cases where letters of attestation are not required, companies still need to maintain adequate internal records of compliance.
90-Day Duty Postponement
On April 18, 2020, President Trump signed an executive order, under the emergency provisions of the Tariff Act of 1930 (19 U.S.C. § 1318(a)), authorizing the Secretary of the Treasury in consultation with the Secretary of Homeland Security to temporarily extend deposit deadlines for importers of record suffering significant financial hardship because of COVID-19.4 In response, on April 22, 2020 CBP amended its regulations at 19 CFR § 24.1a under this emergency authority (85 Fed. Reg. 22349 (April 22, 2020)).
Importers of record now have an additional 90 days to deposit estimated duties, taxes, and fees for merchandise entered in March and April 2020, which normally would be due as of the date of entry or withdrawal from warehouse. No interest will accrue on deferred duties during the 90 day period. This temporary postponement only applies to importers of record with a “significant financial hardship,” which is defined as an importer with gross receipts in March 13-31, 2020 or April 2020 that are 60 percent less than the gross receipts for the comparable 2019 period, as a result of fully or partially suspended operations due to COVID-19. Importers of record need not file additional documentation with CBP to be eligible for this relief but must maintain documentation as part of their books and records establishing that they meet the requirements for relief. Importantly, this emergency action does not permit return of any deposits of estimated duties, taxes, and/or fees that have already been paid.
This temporary postponement also does not apply to entries subject to antidumping, countervailing, Section 301 (includes the China tariffs), Section 232 (includes steel and aluminum), and Section 201 duties. CBP published Frequently Asked Questions (“FAQs”) available here that provide guidance on application of the exceptions and topics such as duty drawback, payments made through brokers and other policy guidance.
While the postponement currently is set to cover only March and April and last for 90 days, importers should remain alert to any potential extensions of covered months, the length of the postponement, and any other changes in how the rule is administered.
Continuation of Border Closings
On April 20, 2020, CBP extended the temporary closure of the U.S. land borders with Canada and Mexico. On March 24, 2020, CBP first issued notice it was restricting entry into the United States from Canada or Mexico to only “essential travelers.” The March 24, 2020 order was set to expire on April 20, 2020 but CBP determined that a continued closure of the border was necessary to combat the spread of COVID-19. Through identical notices on Canada and Mexico, CBP extended the temporary closures until May 20, 2020. Until then, only “essential travelers” will be permitted to enter the U.S. from Canada and Mexico.
Essential travelers authorized to continue entering the U.S. from Canada and Mexico are defined to include:
- U.S. citizens and lawful permanent residents returning to the United States;
- Individuals traveling for medical purposes (e.g., to receive medical treatment in the United States);
- Individuals traveling to attend educational institutions;
- Individuals traveling to work in the United States (e.g., individuals working in the farming or agriculture industry who must travel between the United States and Canada/Mexico in furtherance of such work);
- Individuals traveling for emergency response and public health purposes (e.g., government officials or emergency responders entering the United States to support other emergencies);
- Individuals engaged in lawful cross-border trade (e.g., truck drivers supporting the movement of cargo between the United States and Canada/Mexico);
- Individuals engaged in official government travel or diplomatic travel;
- Members of the U.S. Armed Forces, and the spouses and children of members of the U.S. Armed Forces, returning to the United States; and
- Individuals engaged in military-related travel or operations.
During the COVID-19 pandemic, the U.S. government continues to alter its regulations governing cross-border transactions and travel. The rules aim to balance public health and safety, domestic supply chain security for PPE, and the need for economic relief and stimulus. International trade compliance personnel can continue to assist their companies by staying up to date on these developments as they evolve on a near daily basis, and our team at Dechert is available to help.
1) 85 Fed. Reg. 22021 (Apr. 21, 2020).
2) The FEMA Rule contains a limited exemption for U.S. manufacturers provided at least 80% of their U.S. production was distributed within the U.S. during the preceding 12 months.
3) For exemption No. 9 (Shipments for Which the Final Destination is Canada or Mexico), exporters must also certify that the goods are intended for final use in Canada or Mexico and are not being transshipped through Canada or Mexico.