The US is postponing duty payments for goods importers for 90 days in a bid to help them navigate “significant financial hardship” as a result of the coronavirus outbreak.
However, the news will bring limited relief to garment and footwear brands and retailers that have had to shut up shop in recent weeks in a bid to curb the spread of the virus.
In a statement, US Customs and Border Protection (CBP) said President Donald Trump has signed an executive order to provide additional economic support for all US businesses, including critical supply chains for the country’s manufacturers during the pandemic.
The order gives the administration the flexibility to allow for a 90-day deferment period on certain payments for importers who have faced a “significant financial hardship” due to the Covid-19 pandemic response. This payment flexibility will apply to payments for goods imported in March and April.
But imports subject to duties associated with antidumping and countervailing duties (AD/CVD), and Section 201, 232 and 301 Trade Remedies are not included in this relief effort. This means textile and apparel covered by the List 3 and List4A under the US Section 301 action against China – most apparel items imported from China – and the US Section 301 action against the EU products – are not eligible for the deferral programme. However, items on the List 4B product list under the US Section 301 action will be eligible.
The American Apparel and Footwear Association estimates due to the Section 301 goods non-eligibility, about 35% of apparel, 34% of footwear and 65% of travel goods will be excluded from the benefit.
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At the beginning of the month US footwear and apparel retailers and brands were cautiously optimistic at reports the Trump administration was planning to stop collecting duties on imports for at least three months to help ease the economic fallout of the coronavirus.
Companies are seeking help at a time when many are trying to stay afloat as sales slump amid store closures and the suspension of online operations under lockdowns to help limit the spread of Covid-19. Efforts are also seeing workers laid off or furloughed, and executives taking pay cuts.
In the letter to President Trump in earlier April, 400 company heads, including executives from Adidas North America, Levi Strauss & Co, Columbia Sportswear Company, Under Armour, Kontoor Brands, Delta Galil Industries and Jockey International, had expressed their support of the move saying the deferral of duty payments “is critically important during a prolonged period of little to no revenue.
Today (20 April), the National Retail Federation (NRF) said the move was “welcome news to retailers struggling to find any good news during this extremely difficult time.”
“We encourage the administration to broaden these deferrals for additional relief. Retailers don’t build stores, buy products and hire associates only to close their doors for weeks at a time. The challenges to the retail industry brought on by this pandemic are severely acute, at best. This deferral provides some retailers with additional liquidity and better cash flow, giving hope for business continuity and a faster recovery once the pandemic has passed.”
American Apparel & Footwear Association (AAFA) president and CEO Steve Lamar agreed the deferral of some duty payments and import fees would provide “some of the liquidity needed to keep more Americans employed and more American companies operational during this crisis.”
But he added: “Limiting the goods that qualify for deferral will in turn limit the relief that is provided for America’s employers and also limits the beneficial impact for US supply chains that have been mobilised to meet the personal protective equipment shortage we face domestically. We urge that all goods – including textiles, apparel, footwear, and accessories facing Section 301 tariffs – be covered by this deferral action. Every day we have to pay those duties means another day we can’t pay our workers.”
However, the National Council of Textile Organizations (NCTO) called the move “counterproductive” at a time when domestic textile producers and its workforce have mobilised to transform their production lines to manufacture the personal protective equipment (PPE) supplies for frontline healthcare and medical workers fighting the Covid-19 pandemic.
“This move contradicts the administration’s top stated priority of rebuilding American manufacturing and buying American and could have severe negative implications for the entire US textile industry, whose companies and workforce already are facing enormous economic hardship.
“We support the need to temporarily eliminate barriers to the entry of emergency medical supplies and certain PPE inputs tied directly to the COVID-19 response. But make no mistake, the key drivers behind efforts to defer tariffs have nothing to do with facilitating access to PPE products or stopping the spread of Covid-19.
“Our industry is being asked to do extraordinary things. We are heeding that call, but we need help to ensure the supply chains we are creating overnight don’t evaporate tomorrow. We need strong procurement policies and additional funding for our industries to ramp up and retool – not further measures that incentivise offshore production. We need to maximise the US domestic production chain right now to every extent possible in helping fight Covid-19 and make the products American frontline workers desperately need.
“We need to provide immediate and substantial relief to our manufacturing sector and their workforce who are suffering enormously right now. It’s critical that we have a long-term US government plan to ensure that we aren’t relying on offshore producers to make medically necessary, live-saving PPE. We shouldn’t be providing handouts to reward the very companies that helped offshore these industries so many years ago.”