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The judge who initially ordered customs officials to immediately begin refunding illegal tariffs imposed under the International Emergency Economic Powers Act (IEEPA) has amended his order to grant the government more time to make changes to its automated customs systems.
An official with Customs and Border Protection (CBP) told the court the necessary changes could be completed by or before late April.
In a March 6 filing in Atmus Filtration, Inc. v. United States, a protective claims case related to the IEEPA tariffs levied by the Trump administration and overturned as illegal in a Feb. 20 Supreme Court ruling, a senior customs official said the government would adhere to an order to provide refunds but that it needed 45 days to do so.
A March 4 order issued in the case by Judge Richard Eaton of the U.S. Court of International Trade (CIT) garnered headlines because he ordered the government to immediately refund and cease collecting duties levied by executive order, based on the Trump administration’s now-invalidated interpretation of IEEPA. However, after receiving new testimony from the CBP and conferencing with the plaintiffs and government attorneys on March 6, Eaton suspended the “immediate” portion of his order.
Grant Thornton insight:
The government could still seek to delay issuing refunds for the approximately $170 billion collected, plus interest, in more than 53 million payments; President Donald Trump suggested in public remarks hours after the Supreme Court ruling that the issue of refunds would be tied up in litigation for years.
However, the CIT order and the suggestion of cooperation from the CBP indicate that refunds could be made in a fairly timely fashion.
Here are steps importers should take to prepare for refunds:
- Register for electronic refunds with the CBP’s Automated Commercial Environment (ACE) system, if you have not already. CBP currently plans to issue refunds electronically, via the Treasury Department. Refunds will be issued only electronically, and according to CBP, only a small fraction of importers are registered for electronic refunds.
- Conduct an audit of tariffs paid, and when they were paid, to have your own calculation of refunds and interest owed. The CBP says it will make its own calculations, and it plans to issue refunds as lump-sum payments rather than for each individual duty paid.
- Consider a protective claim suit within the CIT if duties are close to final liquidation (up to 314 days from import) and CBP does not grant a 180-day extension.
In a March 12 court filing the CBP appeared to be ahead of its 45-day deadline, suggesting significant progress has been made on most tasks related to refunds.
Not done with other tariffs
While importers could soon receive refunds for the IEEPA tariffs, the Trump administration has begun replacing the struck-down duties with other import taxes. On Feb. 20, Trump imposed a broad 10% tariff to replace a nullified one under IEEPA, citing the never-before-used universal tariff authority for balance of payments or dollar devaluation crises under Section 122 of the Trade Act of 1974. Under that law the 10% tariff can be increased to 15%, which Trump has said he will do but not yet followed through on. This authority expires after 150 days without Congressional approval of an extension.
Grant Thornton insight:
The delay in raising the Section 122 tariffs to 15% may be because the Trump administration previously agreed to tariff most United Kingdom imports at 10%; Section 122 tariffs are universal by design, and not targeted by country, so an increase to 15% would violate the U.S. side of the temporary agreement and throw into doubt the UK’s own commitments under that framework.
As with IEEPA tariffs, the use of Section 122 is now facing legal challenge. On March 5, 24 states sued the federal government over these new tariffs; on March 9, two importers followed suit, arguing that the balance-of-payments crisis conditions for Section 122 do not currently apply. The lawsuits are also before the trade court could lead to an injunction and a lengthy appeals process similar to that in the case of the IEEPA tariffs.
Separately, the Trump administration has begun to follow through on its stated intent to replace the IEEPA tariffs with more duties using trade investigations under Section 301 of the Trade Act of 1974, initiating the first new tranche on March 11. (See related article) These appear to be designed to be as broad-reaching as possible but flexible to target imports from specific countries.
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