Tariff Refunds and Tariff Investigations

Tariff policy is proceeding rapidly in two different directions: first, Customs and Border Protection (CBP) is working to comply with the Court of International Trade’s order to have a tariff refunds system in place quickly; second, the Administration announced two very broad investigations targeting dozens of countries looking towards imposition of further tariffs, possibly at higher levels.

• The Court of International Trade’s requirement that CBP adopt an automated refund system is a strong result for business, particularly for smaller importers who would be concerned about the costs of litigation to recover what the Supreme Court has said are unconstitutional duties.
• The Administration’s 10% global tariff must expire in July, unless Congress votes to extend it, which is unlikely.
• The Administration has initiated 76 investigations under Section 301 to impose additional tariffs on most of the US’ major trading partners. Because of the speed of these investigations, new tariffs could be subject to litigation against them. Business has an opportunity to comment on the investigations in April.
• The future of the “framework” trade agreements is closely related to the new investigations. Malaysia’s decision to declare its framework agreement “null and void” shows that the US’ perceived advantage may be slipping; some countries are considering options rather than simply implementing the agreements from fear of even higher tariffs.

Tariff Refunds After Learning Resources

In Learning Resources v. Trump, the Supreme Court ruled that the fentanyl-related tariffs on Canada, China, and Mexico and the “Liberation Day” tariffs all imposed under the International Emergency Economic Powers Act are unconstitutional. The Court stated that these tariffs are taxes, and the power to tax lies only with Congress, not the President.

While the Supreme Court’s decision did not include an order or process for refunds of the tariffs declared unconstitutional, it reaffirmed the exclusive jurisdiction of the Court of International Trade on tariffs-related cases. That court then issued a ruling confirming that the tariffs refund process would be national (rather than limited to parties to the case), because the Uniformity Clause of the Constitution provides that “all Duties, Imposts, and Excises shall be uniform” throughout the US.

Following that decision, the Court of International Trade ordered CBP to prepare a system for automatic refunds of tariffs paid under the now-invalidated Executive Orders so that companies would not have to file suits to obtain the refunds to which they are entitled. On March 12, CBP told the Court that the system was “40%-80%” complete; on March 30, the agency updated its estimate to “65-85%” complete.”¹ In theory, the system should be able to issue the refunds no later than late April. The Court will keep a close watch on CBP’s progress. Importers and brokers (those who actually paid the tariffs to CBP) will have to file with a CBP online claim portal (the Consolidated Administration and Processing of Entries system) to receive the refunds, but they will not have to file separate lawsuits with the Court of International Trade to do so. The Court intends it to be a purely administrative process, far faster than regular litigation and much more favorable to small importers less able to bear the costs of litigation.

Importantly, on March 30, the Court extended the refunds to all tariffs paid under the International Emergency Economic Powers (IEEPA) tariffs the Court invalidated, including “fully liquidated entries” that had been paid earlier, on the ground that the Supreme Court invalidated the tariffs in their entirety. This raises the amount potentially to be refunded from around $100 billion estimated earlier to around $166 billion.

Some importers, notably FedEx, have stated they will further refund tariffs paid to customers.² But FedEx’s tracking system for packages may make this easier than for other businesses. Costco is already the subject of a class action suit proposing that it should pass on any tariff refunds it receives to customers – which would be extraordinarily difficult to administer.³

New Tariffs – and New Tariff Investigations

The Administration reacted strongly to the Supreme Court’s decision in Learning Resources. First, the President imposed a 10% global tariff under Section 122 of the Trade Act of 1974, which permits tariffs up to 15% to address urgent balance of payments issues. Tariffs under this section are limited to 150 days unless Congress specifically votes to extend them.

“Structural Excess Capacity” Investigations

Beyond the global tariff, the Administration’s principal response to the Supreme Court decision to preserve its tariff policy has been launching two new investigations under Section 301(b) of the Trade Act of 1974, which covers “unfair trade practices.” In addition, some past investigations have taken greater time than the Administration may be contemplating if its goal is to have new tariffs in place before the expiration of the Section 122 tariffs in July.

The first investigation concerns alleged “structural excess capacity and production in manufacturing sectors” in 15 nations and the EU (China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India). It thus covers many of the US’ largest trading partners, though not Canada.⁴

The Administration defends this claiming that “problems” are other countries being exported to the US (instead of those countries simply being more successful at producing products cheaply and efficiently) and states that its goal is to “reshore critical supply chains and create good-paying jobs for American workers across our manufacturing sectors [.]” The Administration further states that “[a]cross numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically. This overproduction displaces existing U.S. domestic production or prevents investment and expansion in U.S. manufacturing production” and that the US in some cases “has fallen worryingly behind” foreign competitors (which is not statutory grounds to impose the tariffs).

The statutory requirement for imposing tariffs under Section 301 is whether “acts, policies, and practices are unreasonable or discriminatory and burden or restrict U.S. commerce.” The Administration will likely treat this as a low bar to impose tariffs. The Administration is also required to consult with foreign countries before imposing these tariffs.

Written summaries of testimony for this series of investigations are due to USTR on April 15; public hearings on the investigation will begin May 15.

Forced Labor Investigations

US law (the Tariff Act of 1930) prohibits the importation of goods produced with forced labor. Most other US trading partners have similar prohibitions in domestic law or have adhered to relevant conventions of the International Labour Organization. Now, USTR has also initiated 60 separate investigations under Section 301 relating to “the failure to impose and effectively enforce a ban on the importation of goods produced with forced labor are unreasonable or discriminatory and burden or restrict U.S. commerce.”⁵ The investigations cover the principal countries (and the EU) under the Liberation Day tariffs.

The Administration argues that “American workers and firms have been forced to compete against foreign producers who may have an artificial cost advantage gained from the scourge of forced labor. These investigations will determine whether foreign governments have taken sufficient steps to prohibit the importation of goods produced with forced labor and how the failure to eradicate these abhorrent practices impacts U.S. workers and businesses.”

Summaries of written comments under these investigations are due to USTR on April 15, and public hearings will begin on April 28. If the tariffs are to be imposed, including consultations with affected countries, before the expiration of the Section 122 tariffs in July, this is a very aggressive schedule – one that could permit opponents to litigate on the ground that the investigative and consultation requirements of Section 301 were not met.

Tariffs and The Future of the Framework Trade Agreements

The Administration’s policy for the last year has been to negotiate framework trade agreements with trading partners subject to the Liberation Day tariffs and sectoral tariffs imposed under Section 232 of the Trade Expansion Act of 1962, generally offering lower tariffs in exchange for promises to remove what the Administration sees as trade barriers and non-tariff barriers, promises to increase investment in the US and increase purchases of US goods, and in some cases promises to increase cooperation against third countries.

By invalidating the tariffs imposed under IEEPA, the Learning Resources decision raised questions about the future of the framework trade agreements. The President has threatened some countries with “much higher” tariffs⁶ if they do not fully implement their commitments under the framework trade agreements even though the agreements are not fully binding on the US itself and can be changed at any time. For instance, the President threatened to raise tariffs on South Korea from 15% to 25% on the ground that the framework had not been incorporated into domestic Korean law.

Malaysia has said that it regards the framework agreement with the US⁷as “null and void.” Other countries, like Japan, have taken steps to move forward on the investment commitments, concentrating at first on oil and gas and critical minerals projects.⁸ Still other countries are waiting to see what the Administration might do – and are probably seeking to use the prospect of non-compliance with the agreements as leverage against the US in key areas, including critical minerals policy and other sensitive sectors, to reduce the threat of new tariffs at a time when the Administration may hesitate to impose major new tariffs because of inflationary pressures.

Business’ Voice

The Court of International Trade’s proceedings requiring CBP to offer an automated refund process rather than forcing individual lawsuits is a positive result for importers of record, who should be able to obtain their refunds fairly easily in a reasonably short period of time. Whether or not those refunds are passed on to businesses who used the importers or Customs brokers is a matter between the companies and their agents, or for special situations such as FedEx, between a company and its customers.

The public hearings on the proposed new tariffs offer an opportunity for business to have a voice in the process, either to encourage new tariffs because of trade barriers abroad or to demonstrate how tariffs on essential imports would harm US business supply chains and US consumers. Participating in the process is the best way to ensure business’ voice is heard. While other countries may hesitate to follow Malaysia in formally ending their reciprocal trade agreements, both the threat of new tariffs on countries and sectors and the US’ somewhat weakened negotiating position after Learning Resources and concerns over inflation indicate that tariff policy will remain a contentious issue throughout 2026.

Endnotes