The Cavs got trade exceptions. So what?

BY foxsports • July 27, 2015

The Cleveland Cavaliers traded Brendan Haywood, Mike Miller, and two future second-round picks to the Portland Trail Blazers Sunday night in exchange for, well, nothing really. They got some cash considerations, but the most impactful part of the return was two trade exceptions. Whereas the Cavs were on the hook for $10.5 million in salary to Haywood and $2.8 million to Miller, they now have those salary amounts in trade exceptions. What does that mean, how can they use them, and why does it matter? Let’s explore.

What is a trade exception?

Larry Coon is a computer scientist by trade — pardon the pun — and he has made breaking down the ever-complicated NBA collective bargaining agreement part of his life’s work, and thus he is an indispensable resource when it comes to figuring out the rules and regulations regarding roster rearrangement. He has penned a 126-question long CBA FAQ that seeks to answer any burning question you might have. Relevant to this trade exception discussion is an article he wrote for ESPN in 2011 after the Los Angeles Lakers traded Lamar Odom to the Dallas Mavericks for only a future draft pick and a $9 million trade exception.

Coon explains what such exceptions are, and how they function:

When a team trades a player by himself, it has a choice. It can take back up to 125 percent of the salary it sent away (the limit is higher under the new CBA for teams under the luxury tax line) and complete the trade right away; or it can take back no more than 100 percent of the player’s salary, but take up to a year to finish the job.

Teams receive trade exceptions when they trade one player and take back less salary than they send away. Teams don’t get a trade exception when they send players together, although it’s often possible to reconfigure a multiplayer trade as separate, parallel single-player trades in order to gain trade exceptions. Trade exceptions can’t be combined with anything — even other trade exceptions.

Think of it as a department store gift card, with a one-year expiration date. Teams can keep spending on it until they use it up, or they can let any remaining balance lapse after a year. It can be used only in a trade (they can’t use it to sign a free agent).

Generally, two teams engaging in a trade need to make sure that they are sending and receiving comparable amounts of salary.1 This was part of the appeal of Brendan Haywood’s contract, even if he never played — $10.5 million is a big number, and the Cavs were hopeful that they could use his deal to grease the skids on a major acquisition like the rumored Joe Johnson trade with the Brooklyn Nets. Now that the Cavs have traded Haywood (and Miller) for cash only, they get trade exceptions equal to those players’ contracts. Trade exceptions cannot be used on any sort of free agents, so this deal doesn’t affect any of the Cavs’ ongoing free agent negotiations except that they’ll have a slightly smaller tax bill.

A note on the “send players together” bit: it seems that Haywood and Miller were technically traded separately for one second-round pick each, with each trade giving the Cavs a separate exception. As Coon stated, multiple exceptions cannot be combined in one trade.

There’s a fairly recent, uncomfortable Cleveland precedent: the Cavs got a $13.2 million trade exception when LeBron James went to Miami, as the Cavs and Heat executed a sign-and-trade so LeBron could make more money. The Cavs didn’t use that exception within a year, so it expired, just as a gift card to Blockbuster would. Here’s hoping the Cavs fare better than that particular company.

What kind of trade could they swing?

They could use a portion of the Haywood exception in any number of trades — they don’t need to use the $10.5 million all at once. If they wanted to pull off a blockbuster like, say, Joe Harris for the Denver Nuggets’ Randy Foye, they could use portions of either the Haywood or Miller exception to make up for the fact that Foye makes $3.2 million and Harris makes less than $1 million. But rather than focus on potential little trades, let’s look at some just-for-fun-and-for-example biggies.

(Miller or Haywood are included in all of these deals as placeholders for the trade exceptions.)

Joe Johnson trade machine

If the Cavs wanted to revisit that Johnson trade with the Nets, they could do it in the same way that was initially rumored. Since Johnson makes a ton of money — nearly $25 million — the Cavs need to send out roughly the same amount. The Cavs and Nets are luxury taxpayers, and rules dictate that the incoming salary can be no more than 125 percent of the outgoing salary — with the trade exception functioning as a salary gift card. The Cavs could bundle Anderson Varejao’s $9.6 million contract, for instance, with the $10.5 million exception for Johnson. The big exception, for all intents and purposes, is as valuable to the Cavs as Haywood was. Miller’s smaller exception could also be used in lower-figure deals.

All of that said, the Nets aren’t in as dire of financial straits as they were earlier this summer, having used the stretch provision to waive Deron Williams. Their cleaner salary situation lessens their need to offload salary, but again, these trades aren’t exactly rooted in the world of plausibility. For instance…

Kobe Bryant trade machine


Eric Bledsoe trade machine

If the Cavs decided that Mo Williams wasn’t the answer at backup point guard and/or they wanted to get younger on the perimeter, they could call the Phoenix Suns and see if they’re happy with 25-year-old combo guard — and Rich Paul client2 — Eric Bledsoe. Bledsoe makes $13.5 million per year, almost an exact match with the total of the Cavs’ two trade exceptions. But remember, exceptions cannot be combined in one trade. The Cavs could send Phoenix Varejao and future draft picks, and use the Miller trade exception to make up for the salary difference. They could also trade away Varejao and use a portion of the Haywood trade exception.

So are they going to use the exception(s) soon?

They could, but I wouldn’t bet on it. Teams generally aren’t looking to trade their high-priced (and usually high-talent) players late in the summer, at least not this summer. With the exception of the Philadelphia 76ers, there aren’t many teams who would be willing to trade away a major player for nothing but picks. There were some rumblings of such moves before the NBA Draft — most notably a Lakers-Kings trade built around DeMarcus Cousins — but it doesn’t make much sense for any team to blow it up now for anything but cap relief.

Even teams that aren’t good right now are in not-terrible shape. The Lakers are weighed down by Kobe’s contract, but that expires after this year and they have some promising young players. The Celtics aren’t great, but they have a bunch of pieces that they could move in a big trade, with Houston’s James Harden acquisition as the prototype. The Knicks have finally gotten themselves out of salary cap hell, and they signed Arron Afflalo and Robin Lopez this summer — they’d presumably like to see what they have before taking a wrecking ball to the roster. The Sixers would listen to any offer in the name of the #process, but they don’t have any needle-moving players and they would likely want a bevy of draft picks, on which the Cavs are growing increasingly light.

The more likely path is for the Cavs to keep the trade exceptions in their pocket and keep an eye on the rest of the league before next year’s trade deadline. Some teams are bound to underperform3 or, in the case of the Western Conference, find themselves on the outside of an absurdly competitive playoff race looking in. When that happens, expect the Cavs to at least sniff around the carcasses and see if they can’t find a deal worth the cost — in both tax payments and (presumably) draft picks.

Dan Gilbert has shown that he’s willing to foot the bill, and David Griffin has shown that he can hash out deals, but there’s no guarantee that the Cavs will use both or either of their trade exceptions — and that’s okay. It’s titillating to think about the Cavs picking up another All-Star, and by all indications the time to go gung ho for the title is now. But Griffin is as sharp as anyone in the 30-team poker game of NBA roster building, and he’s happy to fold his hand if that is ultimately the best move for the franchise. If nothing else, the Haywood/Miller moves give Griffin a few more chips to play with.

Should the Cavs decide to echo their playoff slogan and go all in, those extra couple chips could make all the difference.

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