NEW YORK — The U.S. government’s plan to refund billions of dollars in tariffs, initially deemed illegally imposed by President Donald Trump, is facing a critical legal challenge regarding eligibility. A U.S. Customs and Border Protection (CBP) official is scheduled to testify in federal court Tuesday, as the dispute over who gets to apply for these refunds escalates to the U.S. Court of Appeals for the Federal Circuit.
Dispute Over Refund Eligibility
The core of the contention lies in whether all businesses that paid the now-defunct import taxes should be eligible for refunds, plus interest, or if only those directly involved in over 2,500 lawsuits challenging the tariffs are entitled to seek reimbursement. The Justice Department has appealed an earlier order by Court of International Trade Judge Richard Eaton, which mandated a system for ‘all importers of record’ to apply for their share of the estimated $166 billion collected by CBP.
Judge Eaton had directed CBP Commissioner Rodney Scott to appear in court to detail the agency’s timeline for complying with his ‘universal’ refund order. However, the Justice Department objected, proposing a deputy attend instead. When Eaton insisted on hearing from the agency head, the Justice Department appealed both the testimony mandate and the broader ruling on refund eligibility. The Federal Circuit has since temporarily suspended the requirement for Commissioner Scott to testify, agreeing instead to hear from Susan Thomas, the agency’s executive assistant commissioner for trade.
CBP’s Refund System and Limitations
The CBP launched an online system for refund applications on April 20. As of June 1, claims totaling $89.6 billion had been accepted for processing. The agency reported last month that it had directed the Treasury Department to issue $20.6 billion in refunds. However, the agency has so far limited applications to businesses whose tax bills had not been finalized by the time the Supreme Court struck down the tariffs in late February, or whose bills had been settled within the preceding 80 days.
Susan Thomas stated in a court declaration that CBP is developing a method to handle refunds for older shipments but will not process cases beyond the 80-day window while Eaton’s order for all duty payers is under appeal. ‘Should the court’s order become final and require reliquidation of entries of all importers, CBP intends to fully comply with the court’s final decision as expeditiously as possible,’ she wrote.
The Mechanics of Tariff Assessment and Liquidation
The hearing is expected to delve into CBP’s capacity and willingness to broaden the refund process to include companies with older tariff payments. The agency’s process for reviewing and clearing customs declarations on new imports is detailed and deadline-driven. When foreign goods enter the U.S., importers or their customs brokers estimate the tariffs owed and make a deposit. CBP then has up to 314 days, and potentially longer, to review the declared goods, determine the final amount owed, and adjust the deposit accordingly. This process is known as ‘liquidation.’ Importers typically have 180 days to protest CBP’s determination, after which goods generally cannot be reassessed.
Judge Eaton has stated his intention to ‘ascertain if it is the government’s policy to return all of the unlawfully collected duties either by complying with the court’s order, or by some other means.’
Constitutional Arguments and Class Action Potential
Lawyers representing the five companies behind the lawsuit that led to Eaton’s order argue that it would be unconstitutional for them to pay less in tariffs than other companies that also paid the invalidated duties. The Supreme Court had previously held that President Trump improperly imposed these ‘reciprocal’ tariffs by citing an emergency powers law, thereby usurping Congress’s taxmaking authority.
These companies are seeking to have their case certified as a class action, representing ‘potentially tens of thousands of identically situated importers.’ Meghann Supino, a partner at the law firm Ice Miller, anticipates that CBP will continue to enhance the technology required for broader tariff refunds. However, she noted, ‘whether they open it up to non-litigants and importers that do not have orders for their own sake is going to continue to be an issue with the appeal.’
The upcoming hearing before the U.S. Court of Appeals for the Federal Circuit is anticipated to provide crucial clarity on the future trajectory of these tariff refunds and the government’s commitment to a comprehensive resolution for all affected importers.
