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SBA To Withdraw Forms 3509 And 3510

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Any Paycheck Protection Program (PPP) borrower that has already received a request for Form 3509 or Form 3510 from its lender should contact that lender for instructions on how to proceed in light of reports that the SBA will withdraw the requirement for these loan necessity questionnaires.

Borrowers who have not yet received a formal request for the loan necessity questionnaire may not receive one.

In a statement dated June 23, Associated General Contractors of America (AGC) President Stephen E. Sandherr said that, after weeks of lawsuit negotiations with the U.S. Department of Justice (DOJ), DOJ had told AGC that SBA intends to withdraw Form 3509.

The SBA’s withdrawal of the loan necessity questionnaires was discussed June 24 on the AICPA’s Town Hall webcast. A replay of the webcast is available for free on AICPA TV.

Since November 2020, SBA has required Form 3509, Loan Necessity Questionnaire (for-profit borrowers) and Form 3510, Loan Necessity Questionnaire (nonprofit borrowers) from borrowers requesting PPP loan forgiveness of $2 million or more when aggregated with PPP loans received by affiliates. Form 3509 focused on the “good faith” certification that businesses had to make when applying for a PPP loan, but it asked for significant documentation about how the borrower fared after receiving the loan.

Until the SBA publishes official guidance, caution is advised and requests to complete the questionnaire should not be ignored. Typically, borrowers are given only 10 days to submit the completed form to the lender. Usually, the request for Form 3509/Form 3510 also includes a request for other supporting documents that the borrower was instructed to maintain in its files; that documentation might still be required, even if Form 3509/3510 no longer is.  

The withdrawal of the loan necessity questionnaire in its current form may not change the SBA procedures regarding the audit of all PPP loans of $2 million or more. Therefore, documentation of all aspects of those loans, including necessity, remains essential.   

Retirement Plans Now Have Cybersecurity Guidance

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On April 14, the Department of Labor (DOL) outlined a range of practices for combatting the growing threat of cybercrime to ERISA-covered retirement plans. This first-ever cybersecurity guidance issued by the DOL’s Employee Benefits Security Administration (EBSA) casts a wide net, addressing key issues affecting plan sponsors, fiduciaries, record keepers, as well as plan participants and beneficiaries.

The DOL estimates that defined contribution and defined benefit retirement plans hold a combined $9.3 trillion in assets. These plans also store vast amounts of vital personal information online—information that could put participants and their assets at risk if a plan’s online systems were breached. In issuing this guidance, the DOL acknowledges the imminent risk posed by acts of cybercrime as well as the obligation of responsible plan fiduciaries, as set forth by ERISA, to help mitigate these risks.

Three Types of Guidance Issued

The DOL’s guidance is presented in three separate documents, each targeting a different audience. These best practices and tips are offered as recommendations for safeguarding the assets and personal information of plan participants while helping to reduce the risk of fraud and loss.

Tips for Hiring a Service Provider

This document aims to help plan sponsors and fiduciaries meet their responsibilities under ERISA to prudently select and monitor service providers that follow strong cybersecurity practices. Specific recommendations include scrutinizing the service provider’s information security standards, practices, policies, and audit results; evaluating its track record in the industry, including whether the provider has experienced any past security breaches and how it responded; inquiring about any potential insurance policies the service provider may hold that cover cybersecurity breaches; and reviewing contracts to ensure that they include provisions for compliance with cybersecurity and information security standards.

Cybersecurity Program Best Practices

This document offers 12 best practices that address the needs of record keepers and other service providers responsible for managing plan-related IT systems and data, as well as the needs of plan fiduciaries who are responsible for hiring such vendors. The recommended practices include having a formal, well-documented cybersecurity program; conducting annual risk assessments; holding periodic cybersecurity awareness training sessions; and implementing and maintaining strong technical controls in keeping with industry best practices.

Online Security Tips

While this tip sheet targets plan participants and beneficiaries, the information is also important for plan sponsors to know and potentially integrate into employee education programs focused on online safety. These tips include encouraging users to regularly monitor their accounts online; creating strong passwords; using multi-factor authentication; being aware of (and knowing the signs of) phishing attacks; and keeping antivirus applications and all system software up to date.

 Building on Past DOL Guidance

Although the DOL noted that this guidance was an important “first step” in safeguarding retirement benefits and personal information, it also builds on earlier EBSA guidance that addressed electronic recordkeeping systems and controls for protecting the personal information of plan participants. In this way, the current guidance may serve as a call to action to plan sponsors, fiduciaries and participants to review and update any established cybersecurity practices and protocols or to create a cybersecurity program using these recommendations.

Insight:

Keep Strengthening Your Controls

While there is no way to eliminate the risk of cybercrime entirely, plan sponsors who understand and take steps to incorporate the DOL’s guidance into their cybersecurity protocols will be on a more solid path to safeguarding their plan assets and participants’ vital information.

​The DOL guidance should be viewed as guidance or recommendations rather than a set of minimum requirements or as regulations. These recommendations underscore the importance of constantly evaluating, testing, and improving your cybersecurity protocols amid a rapidly evolving threat landscape.

Your representative can help you assess your current cyber risk profile.

Transaction Value for Chinese Goods Scrutinized By U.S. Courts

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The U.S. Department of Justice (DOJ) recently challenged the applicability of the “transaction value” for customs purposes under the First Sale Rule (FSR) to imports from China in its April 29, 2021 rebuttal filing in the Imperia Trading, Inc. v United States matter. The case involves the use of the transaction value for FSR claims involving a Chinese manufacturer. The FSR permits importers to use the factory invoice to enter goods when a sale to a middleman takes place before the middleman’s sale to the U.S. importer, among other criteria. However, to apply the FSR, U.S. importers must provide a detailed description of the roles of all parties involved in a multi-tiered transaction and a complete paper trail that shows the structure of such transactions. In sum, the legal standard requires importers to prove that all prices leading to the import transaction constitute viable arm’s length transaction values.

Under U.S. Customs and Border Protection (CBP) rules, the transaction value is the price paid for goods when sold for export to the U.S. The courts have long held that importers must show that all invoice prices constitute viable transaction values and that the manufacturer and middleman are dealing with each other at arm’s length. Further, the prices must be free of any nonmarket influences that affect the legitimacy of the sale price, a standard set in the landmark case of Nissho Iwai American Corp. v. United States. The DOJ stated in its filing that this language also requires importers to establish the absence of any distortive market influences when transacting with China, given its nonmarket economy status. 

The DOJ’s position relies on a 2021 Court of International Trade (CIT) decision in the Meyer Corp. v. United States case, in which the court recognized that China was a nonmarket economy. The court also focused on the language of Nissho Iwai, which, in the past, was applied to transactions between related companies and was widely interpreted to mean the relationship between the companies, not the market conditions in a country. Notably, Chief Judge Mark A. Barnett presided over Meyer and is presiding over the Imperia Trading case.  The DOJ now appears to be seeking to graft nonmarket economy regulations in the antidumping and countervailing duty law context to customs valuation law.

Whether the presence of a nonmarket economy could foreclose the possibility of using the transaction value remains an open issue. However, the Meyer decision suggests that a party might be able to establish the absence of a market-distortive influence through “the factors used by entities located [in the non-market economy] to obtain a duty rate other than the country-wide rate established by the U.S. Department of Commerce in antidumping-duty [sic] proceedings involving nonmarket economy participants.” Meyer and Imperia indicate a potentially new obstacle to support an arm’s length price for transaction value, but the legal impact on the FSR is yet to be determined. If the DOJ prevails in this matter, China’s nonmarket status could potentially undermine the use of the transaction value for products sourced from all nonmarket economies as a whole or potentially could result in new requirements for U.S. businesses to support existing cost structures.

U.S. businesses should use reasonable care to evaluate supplier documentation to make sure it effectively supports import values under CBP rules.

How We Can Help

Customs duties, VAT and trade policy present unique challenges that businesses face when conducting regulated cross-border transactions. We can help businesses navigate the complex rules governing cross-border product movements to minimize duty and tax payments and maximize import and export compliance, including:

  • Tariff classification reviews
  • FTA qualification
  • Customs valuation and transfer pricing analysis
  • Import and export compliance assessments
  • Supply chain planning
  • Customs rulings, protests and other administrative filings
  • VAT registration