The U.S. Congress is expected this week to reach agreement on and pass a bill to add hundreds of billions of dollars in fresh funding to the CARES Act’s small business lending account, the Paycheck Protection Program (PPP), which ran out of money last week.

The anticipated measure, the final details of which are still being negotiated, will include $75 billion for the nation’s hospitals and health systems and $25 billion for health testing. The issue of additional aid to states, territories, and local governments will be left to a future round of COVID-19 response legislation.

The timing for Senate and House action on the interim coronavirus package will depend on when an agreement is locked in and formally introduced in the form of legislative text. The Senate is scheduled to be in pro forma session this afternoon. The office of House Majority Leader Steny Hoyer (D-MD) this weekend notified Members of Congress that the House could meet as early as Wednesday morning to approve the bill.

“Members are further advised that at this time, a recorded vote on the interim legislation is likely in the House this week,” Hoyer’s office added. “Members will be given sufficient notice about the exact timing of any votes and when they will need to return to Washington, DC.”

As the skirmish over the interim package has played out, some congressional leaders and committees on the Hill have also been conducting less visible discussions about the composition of an eventual economic recovery package that could feature an investment of $1 trillion or more in new infrastructure.

Debate over the timetable and scope of such a “Phase 4” measure will shift into high gear after the interim bill is signed into law. The discussion will unfold as the nation’s governors, still fighting the spread of the virus but under pressure from the Trump Administration and some citizens to reopen their economies as quickly as possible, contemplate a path forward.

 

Tax and Economic Development Updates

As noted above, a deal to fund the PPP appears to be imminent. Last night, Treasury Secretary Steven Mnuchin indicated that, among other things, lawmakers had agreed to include an additional $300 billion in PPP funding as well as $50 billion in additional funding for the Emergency Injury Disaster Loan (EIDL) program. However, as details about the parameters of a deal have begun to surface, one key aspect that is still unknown relates to efforts by Congressional Democrats to impose certain restrictions on a portion of the funds made available through the PPP. As previously reported, the Small Business Administration (SBA) last week released updated data about the loans made through the program. As you will recall, as part of negotiations, Democrats have proposed imposing guardrails to make at least a portion of the funding available through community-based financial institutions “to ensure all eligible small businesses can access this critical funding and are not turned away by banks.”

Beyond needing additional funding for the small business lending program, there are also discussions about other near-term actions that can provide relief for small businesses. For example, at present, companies are not able to avail themselves to both the employee retention tax credit and PPP loans. However, our sources indicate that there may be an effort underway that would allow this. Another issue at play relates to the June 30 date for purposes of loan forgiveness that requires that employees be rehired by June 30. Given that the economy is expected to take quite some time to recover, it seems unlikely that many businesses will be able to ensure that all of their employees are rehired by June 30, and thus we are beginning to hear discussions about the need to extend this deadline. No doubt these and other issues will continue to receive attention as negotiations over the next package move forward.

Health Updates

As details begin to emerge on the House, Senate, and White House negotiations over an interim relief package, we understand there is agreement over providing an additional $75 billion for hospitals and $25 billion for COVID-19 testing. President Trump has acknowledged the need to assist healthcare facilities in responding to the pandemic, stressing during his Sunday press briefing that negotiators are “looking at helping our hospitals and our rural hospitals who have been hurt very badly. The rural hospitals for a long time have not been treated properly. We are looking to help them and beyond.” The administration is still working on distribution formulas for the remaining $70 billion in the CARES Act’s Public Health and Social Services Emergency Fund, established to assist hospitals, providers, and other entities in covering lost revenues and unreimbursed expenses attributed to the pandemic. POLITICO reports the administration is also “still grappling with key questions” on how to utilize the Fund to pay for coronavirus care for the uninsured. President Trump pledged to use the Fund for uninsured COVID-19 care after refusing to open a Special Enrollment Period on HealthCare.gov.

On Sunday, the Centers for Medicare and Medicaid Services (CMS) released guidelines on re-opening healthcare systems and facilities to provide non-emergent care unrelated to COVID-19. These recommendations are focused on areas of the country that have passed gating criteria and are in Phase 1 of the White House’s Guidelines for Opening Up America Again. CMS states these regions should utilize telehealth modalities as much as possible, and the agency makes additional recommendations in the areas of personal protective equipment, workforce availability, facility considerations, sanitation protocols, supplies, and testing capacity. On March 18, CMS recommended limiting non-essential care and expanding surge capacity to allow healthcare systems and facilities to prepare for COVID-19 patients. Healthcare entities across the nation have faced significant decreases in revenue as they have prepared for the pandemic and/or treated COVID-19 patients, with some systems forced to reduce or furlough workers due to financial difficulties.

CMS also announced requirements for notification of confirmed COVID-19 patients among residents and staff in nursing homes. Under these requirements, nursing homes will have to report COVID-19 cases to residents and their families, as well as directly to the Centers for Disease Control and Prevention. CMS said it will provide a reporting tool to these facilities to support federal efforts to collect COVID-19 data for surveillance and response. Nursing homes are to report data “in accordance with existing privacy regulations and statute.” As we described on Saturday, lawmakers in both the House and Senate have expressed concern about the federal COVID-19 response efforts involving nursing homes. House Committee on Ways and Means Chairman Richard Neal (D-MA) wrote to CMS Administrator Seema Verma, asking the agency to “focus more on our nation’s nursing homes, particularly in the areas of transparency and infection control/crisis management.” Senate Committee on Finance Chairman Chuck Grassley (R-IA) wrote to Department of Health and Human Services Secretary Alex Azar and CMS Administrator Verma, requesting more information about the federal response to the coronavirus in nursing homes.

Trade Updates

On Sunday, Trump officials unveiled a policy delaying duty payments on some goods for 90 days, to relieve pressure on certain importers in light of the COVID-19 outbreak. This program only applies to importers facing significant financial hardship as outlined by the regulations and further explained below. First, President Trump signed an Executive Order (EO) delegating authority to the Secretary of the Treasury to issue regulations allowing for the duty-free importation of certain goods. The EO directs the Treasury Secretary, in consultation with the Secretary of Homeland Security, to consider taking such action “to temporarily extend deadlines, for importers suffering significant hardship because of COVID-19,” for such goods except:

  1.  Anti-dumping and countervailing duties;
  2. Section 232 tariffs (currently imposed on certain steel and aluminum products);
  3. Section 201 safeguard tariffs (currently imposed on washing machines and solar panels); and
  4. Section 301 tariffs (currently imposed on certain products from China and from the European Union).

The EO is being implementing via a temporary final rule effective immediately (and on which interested parties may comment within 30 days). According to U.S. Customs and Border Protection (CBP), it will be delaying for 90 days deposit of payment of certain estimated duties, taxes, and fees for formal entries of merchandise entered, or withdrawn from warehouse, for consumption (including entries for consumption from a Foreign Trade Zone) in March or April 2020. Interest will not accrue during the 90-day window.

CBP confirms that this postponement does not apply to any entry, or withdrawal from warehouse, for consumption where the entry summary includes merchandise subject to one or more of the above tariff programs. For example, if an entry contains both goods that are subject to antidumping duties and goods that are not, the entire entry is ineligible for the postponed duty payment. Shipments containing both categories of goods must therefore file separate entries to ensure deferral of payment on eligible goods. Also, CBP will not return deposits of estimated duties, taxes, and fees that have already been paid.

The duty deferral action is not across the board, but only applies to those importers facing significant financial hardship, specified as the following:

  1. 1. “The operation of such importer is fully or partially suspended during March 2020 or April 2020 due to orders from a competent governmental authority limiting commerce, travel, or group meetings due to COVID-19, and
  2. 2. “As a result of such suspension, the gross receipts of such importer for March 13-31, 2020 or April 2020 are less than 60 percent of the gross receipts for the comparable period in 2019.” The importer need not file documentation with CBP showing it meets these requirements, but must maintain such documentation as part of its books and records; CBP may conduct a review in the future to ensure compliance with these requirements. CBP issued a separate alert containing payment instructions for the postponement. This duty deferral action comes as business stakeholders and lawmakers alike called on the White House to enact some level of duty relief. However, some of the tariffs carved out of this policy run as high as 25 percent, meaning that the deferral will provide little relief to importers of those goods.

On Saturday, Canadian Prime Minister Justin Trudeau announced that the United States and Canada had agreed to extend restrictions on non-essential travel across their shared border for 30 days, to May 20. Allowances for essential passenger and cross-border commercial trade remain unchanged. President Trump and Mexican President Andres Manuel Lopez Obrador spoke on Friday regarding the COVID-19 pandemic and other matters; officials are likely similarly to extend U.S.-Mexico border restrictions as well.

The Federal Emergency Management Agency (FEMA) has released additional exemptions from its review of personal protective equipment (PPE) exports. Those exemptions are for:

  1. Shipments to U.S. Commonwealths and Territories;
  2. Covered exports by non-profits or non-governmental organizations meant solely for donation to foreign charities or governments for free distribution;
  3. Intracompany transfers from domestic facilities to company-owned or affiliated foreign facilities;
  4. Shipments of covered PPE that are exported solely to be assembled into medical kits and
    diagnostic testing kits destined for U.S. sale and delivery;
  5. Sealed, sterile medical and diagnostic testing kits where only a portion of the kit contains covered PPE and the covered PPE cannot be easily removed;
  6. Declared diplomatic shipments from foreign embassies and consulates to their home countries;
  7. Shipments to overseas U.S. military addresses, foreign service posts, and embassies;
  8. Merchandise in-transit through the United States;
  9. Shipments whose final destination is Canada or Mexico; and
  10. Shipments on behalf of the U.S. Federal Government.

For exemptions (2), (3), (4), (8), and (9), FEMA will require a letter of attestation be submitted to FEMA via CBP’s document imaging system and placed on file with CBP, certifying to FEMA the purpose of the shipment.

Oversight Updates

One of the three new watchdogs created under the CARES Act, the Congressional Oversight
Commission, received three new members last Friday evening. On April 17, Senate Majority Leader Mitch McConnell (R-KY), House Speaker Nancy Pelosi (D-CA), and House Minority Leader Kevin McCarthy (R-CA) named their picks—Senator Pat Toomey (R-PA), Representative Donna Shalala (DFL), and Representative French Hill (R-AR), respectively. Senator Toomey is the former chairman of the conservative advocacy group, the Club for Growth; Representative Shalala is a former Clinton Administration HHS Secretary; and Representative Hill is a former George H.W. Bush Administration Deputy Assistant Treasury Secretary. The three new members join Bharat Ramamurti, a former aide to Senator Elizabeth Warren (D-MA), who was nominated by Senate Minority Leader Chuck Schumer (DNY) on April 6. The fifth member, to be appointed jointly by McConnell and Pelosi, will be the Commission’s chair. In the past couple of weeks, there have been reports of McConnell and Pelosi exchanging names, but it is unclear how close they are to agreement.

It is also unclear how active the Commission as a body will be until a chair is appointed. What is clear, however, is that the Commission’s first member, Ramamurti, will likely continue his aggressive press for action. After requesting documents from the Federal Reserve Chair Jerome Powell on April 15, Ramamurti has appeared on NPR, published an op-ed in The New York Times, and posted several pointed tweets.

Also on Friday evening, McConnell announced the appointment of Senator Mike Crapo (R-ID),
Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, to lead the Senate’s
oversight of the government’s COVID-19 response, including the distribution of CARES Act funds.

Finally, POLITICO reports that the Government Accountability Office (GAO) has been gearing up to exercise its own oversight over the government’s COVID-19 response. According to GAO, by the end of April, at least 30 CARES Act reviews and audits are expected to be underway by its 3,000 person strong army of investigators, auditors, and analysts. The Act provided an additional $20 million in funding to GAO to facilitate its oversight activities.

Contacts
Squire Patton Boggs (US) LLP
squirepattonboggs.com

 

 

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