The U.S. government has authorised a 90-day delay on the collection of specific customs duties for businesses hard hit by COVID-19.
Despite initiating several extracurricular tariff investigations, this reprieve would only apply to Most Favoured Nation (MFN) import duties – the baseline tariff rates for goods that the U.S. applies to every member of the World Trade Organisation (WTO). While President Trump brushed off rumours for weeks that his administration was considering tariff relief, he eventually took executive action on 20 April after continued pressure from the business community.
This decision does not mean that the U.S. is taking a 90-day break from its entire MFN tariff collection process. To qualify, businesses will have to prove to the government that they have experienced at least a 60% decline in gross revenue due to the COVID-19 pandemic and that the losses were specifically a result of government lockdown orders.
It is important to note that this executive order is not granting a permanent exemption or write-off for MFN tariffs, as many business associations have advocated.
After the 90-day period expires, businesses will be required to pay them back on top of regularly scheduled payments. The U.S. Treasury Department and U.S. Customs and Border Protection (CBP) have issued joint guidance on the way businesses qualify for the temporary reprieve and how to apply.
Which U.S. tariffs are not included in this delay?
Chinese import tariffs: The Trump administration has not included current Section 301 tariffs placed on Chinese imports under consideration for reprieve. However, the U.S. Trade Representative has granted a small handful of exemptions for products related to medicine or public health. This is because the administration is focused on pressuring Beijing to enforce its terms of the recent ‘Phase 1’ U.S.-China trade deal, the purchase of billions of dollars’ worth of American agricultural and energy commodities. Practically speaking, any sort of tariff reprieve for the Chinese government remains out of the question.
Section 232 steel and aluminium tariffs: The U.S. government has had a 25% tariff on steel and 15% tariff on aluminium imports from the European Union and other non-exempted countries since May 2018. This is based on Section 232 of the 1962 Trade Expansion Act, which gives the President the authority to levy tariffs on imports that threaten domestic industries vital to national security. Given that the UK is still following EU rules during the transition period, the tariffs apply to British companies as well. These Section 232 tariffs remain unchanged.
Retaliatory WTO tariffs from Boeing-Airbus dispute: In October 2019, the U.S. Trade Representative imposed retaliatory tariffs on EU goods, including a 10% tariff on all commercial aircraft and a 25% tariff on agricultural and industrial products. This followed a WTO announcement on 2 October that the U.S. had won the right to impose punitive tariffs on EU products in response to excessive EU subsidies for Airbus, a case going back 15 years. Products that have been affected by this dispute will not be eligible for the temporary reprieve. For the UK, these WTO tariffs continue to cover:
- New airplanes or other aircraft, other than military (10%)
- Single malt, but not blended, whiskies (25%)
- Knitwear including sweaters and pullovers (25%)
- Recreational outwear including anoraks and windbreakers (25%)
- Men’s and boy’s suits, both woollen and artificial fibres (25%)
- Women’s or girls’ nightdresses, pyjamas and swimwear (25%)
- Blankets and bedlinen (25%).