The COVID-19 virus, and the efforts governments around the world are taking to try to contain it, are creating challenges for all companies that rely on global supply chains. While most countries have determined that cross-border trade of goods (as opposed to travelers) does not present a meaningful risk of spreading the virus and are doing what they can to reassure the trade community that their borders remain open (again, for goods but generally not for people), trade is slowing due to domestic efforts to contain the virus (e.g., orders closing plants, people sheltering in place, etc.). We are also seeing limited instances of certain jurisdictions placing new restrictions on the export of personal protective equipment and other supplies needed to help combat COVID-19.
That said, there are things that companies with global supply chains should be doing now to help mitigate the impact of slowing trade, such as the following.
- Seek authorization to defer temporarily the payment of customs duties, taxes and fees due on imports. The United States is granting (and other jurisdictions are considering) temporary authorizations to defer the payment of customs duties, taxes and fees on incoming shipments. Governments recognize that the world economy has changed dramatically in a short period of time and are providing deferrals of various tax obligations, including customs duties, taxes and fees.
- Pursue exemptions from additional duties, such as the Section 301 duties imposed on articles of China imported into the United States, for articles that could be used, directly or indirectly, in the fight against COVID-19. The United States is imposing additional duties of up to 25 percent on the majority of articles imported into the United States from China. While there is a product exclusion process, the overwhelming majority of those exclusion requests have been denied. The U.S. Trade Representative recently announced however, that it is considering whether to remove the additional duties from any article that relates to the response to COVID-19, regardless of whether a product exclusion request was previously denied.
- Prepare for the eventual rebound in trade flows by participating in governmental supply chain security programs. While global trade has slowed due to COVID-19, it will pick up again once the worst is behind us (and it will eventually be behind us). When that happens, there will likely be a sharp increase in import activity and, therefore, significant congestion at the borders. Members of government supply chain programs, such as Customs Trade Partnership Against Terrorism in the United States and Authorised Economic Operator in Europe and elsewhere in the world, will likely be given import clearance priority. Companies should take the opportunity now to make sure that they are members in good standing in such programs (or consider joining).
While COVID-19 is having a dramatic impact on global trade in several respects, there are things that companies with global supply chains should be doing now to minimize the harm in the short term, and to position themselves to benefit when the eventual rebound occurs.
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.