Dispute Over Who Receives Tariff Refunds as US Revamps System
A federal judge interrogated a US Customs and Border Protection official on Tuesday regarding the government’s methodology for reimbursing billions of dollars in tariffs that importers had disbursed prior to the Supreme Court’s determination that President Donald Trump unlawfully levied increased duties on goods from the majority of other nations. Court of International Trade Judge Richard Eaton expressed his desire to receive information that would assist him in determining whether to mandate the government to accelerate and broaden its process for issuing tariff refunds. Eaton commended the online system developed by CBP for processing refund claims, noting its effective operation and expressing his belief that the government aimed to return all import tax funds collected without constitutional authority. However, he indicated that a Justice Department appeal of his order mandating the agency to refund all companies that paid tariffs, rather than only those that pursued legal action, posed a risk of obstructing the process. “Sometimes lawyers push legal positions beyond what is useful for the client,” the judge said during a 90-minute hearing in the New York-based trade court.
The legal position advocated by the government may not align with its best interests. The Justice Department contends that only those companies involved in any of the over 4,000 lawsuits that contested the legal framework employed by Trump to impose elevated tariff rates are eligible to pursue refunds. That question is currently under the jurisdiction of the US Court of Appeals for the Federal Circuit. Eaton directed Customs and Border Protection in March to establish a system enabling “all importers of record” to apply for their portion of the $166 billion that CBP estimated it had collected prior to the Supreme Court’s decision to invalidate the global tariffs. However, he permitted the agency to implement the system incrementally as it worked on developing the requisite technology to manage different types of refund claims. The agency initiated the online system on April 20, indicating that it would initially assess applications from importers with unresolved tax bills.
Eaton scheduled Tuesday’s hearing to assist him in determining whether to compel CBP to refund all the money owed by the government immediately or to grant the agency additional time. The pace and scope of the process became a contentious matter when Eaton directed CBP Commissioner Rodney Scott to appear in court to discuss the agency’s timeline for complying with the judge’s “universal” order. The Justice Department expressed its objections and enquired whether one of Scott’s deputies could participate in the hearing instead. When Eaton insisted on direct communication with the head of the agency, Justice Department lawyers contested both that directive and the judge’s more comprehensive ruling regarding refund eligibility. Last week, the Federal Circuit decided to temporarily suspend the requirement for Scott to testify. Susan Thomas, the executive assistant commissioner for trade at CBP, appeared before Eaton instead. The hearing concentrated on the capability and willingness of CBP to initiate the refund process for companies with the oldest tariff payments.
As of Tuesday, claims for refunds amounting to $90 billion have been accepted for processing, with the agency instructing the Treasury Department to disburse $23 billion in refunds, as stated by Thomas to the judge. To date, CBP has restricted applications to enterprises that either lacked finalised tax bills at the moment the Supreme Court annulled Trump’s “reciprocal” tariffs in late February or whose bills had been resolved within the prior 80 days. Thomas indicated that CBP was in the process of developing a mechanism to manage refunds related to older shipments, with an expected completion by the end of July. However, she indicated that the agency would refrain from processing cases that extend beyond the 80-day window while Eaton’s order, which mandates refunds for all duty payers, is currently under appeal. “I can’t speak to the appeal, but I can tell you I will be prepared,” she said. “I am pushing our teams to the limit.” Lawyers for the government argued it unnecessary for Eaton to try to hasten the process by enforcing his order. They said the appeal involves 6.9 per cent of the $166 billion collected and that the vast majority of taxed imports eligible for refunds can either be processed by the existing system or are part of pending lawsuits.
Legal representatives for the five firms involved in the litigation that led to the judge’s ruling argued that $11 billion remains a substantial sum. They contended that it would be unconstitutional for their clients to incur lower tariffs than other companies that also settled the invalidated duties. This situation arises from the Supreme Court’s determination that Trump improperly invoked an emergency powers statute to override Congress’ authority in tax legislation. One of the plaintiffs’ lawyers indicated that a potential resolution could involve Eaton certifying their case as a class action representing “potentially tens of thousands of identically situated importers”. Eaton indicated that the question would need to be deferred to a later date, and he refrained from making any rulings on Tuesday. He remarked that “it would be disappointing if we have to find our way into the world of class action” instead of permitting CBP to advance towards achieving the objective of his comprehensive directive mandating refunds for all. “Let the Customs and Border Patrol be the Customs and Border Patrol,” Eaton said. “Let them do their job, let them do what I believe the government actually wants to do.
