Tariffs Refund Ruling and Next Steps

The Court of International Trade (CIT) has ruled that all importers who paid the fentanyl-related or “Liberation Day” tariffs imposed under the International Emergency Economic Powers Act (IEEPA) are entitled to refunds on the basis of the Supreme Court’s decision in Learning Resources v. Trump; they will not have to file separate lawsuits to obtain refunds. Further, the judge issuing the decision consolidated all related cases in his docket to expedite judicial processing and avoid contrary rulings. While the Administration will likely appeal the ruling, it is a positive step for importers seeking refunds of the tariffs that the Supreme Court has ruled are unlawful.

• The case arose because of a remand from the Federal Circuit to resolve the scope of the CIT’s ability to issue nationwide injunctions following the Supreme Court’s decision in Trump v. CASA limiting their use.
• Because the CIT has nationwide jurisdiction, it may issue nationwide injunctions, a ruling consistent with the Constitution’s guarantee that all duties must be uniform throughout the country. An appeal by the Government would likely face an uphill battle.
• While over 1000 companies had already filed suit seeking refunds, importers who have not filed suit will now not need to file in court to obtain refunds. Now attention turns to CBP and how it will implement the CIT’s ruling.
• While other tariffs are now being imposed, the ruling is positive news for importers as to IEEPA tariffs they have already paid over the last year.
  

Why This Decision?

In August, the Court of Appeals for the Federal Circuit affirmed the decision of the CIT invalidated the fentanyl-related and “Liberation Day” tariffs that had been imposed by Executive Order under the IEEPA. It also took two additional steps: first, it stayed enforcement of the decision, permitting the Government to appeal to the Supreme Court.

Second, the Federal Circuit remanded a portion of the case back to the CIT for consideration of whether the refunds should be applied only to the plaintiffs in the case or to all similarly situated plaintiffs (as the CIT had ruled, because the Uniformity Clause of the Constitution, Art I., Sec. 8, Clause 1, provides that “all Duties, Imposts, and Excises shall be uniform throughout the United States”). However, between the initial decision of the CIT and the Federal Circuit’s ruling, the Supreme Court ruled against the issuance of nationwide injunctions in Trump v. CASA. Thus, the Federal Circuit asked the CIT to consider its ruling in light of that case.

The CIT’s Ruling and Consolidation of Cases

On March 4, a CIT judge ruled strongly in Atmus Filtration v. US².that the general prohibition on nationwide injunctions of Trump v. CASA does not apply to cases under the CIT’s jurisdiction because under the Customs Courts Act of 1980, the CIT has nationwide jurisdiction and thus its injunctions should apply nationwide rather than only in a single judicial district in which other types of cases are brought.

Further, the Supreme Court recognized this “exclusive subject matter jurisdiction” of the CIT in the Learning Resources case by dismissing for lack of jurisdiction a case on tariffs that had been brought in a regular US District Court. Specifically, the judge ruled that “All importers of record whose entries [of goods into the US] were subject to IEEPA duties are entitled to the benefit of the Learning Resources decision.” Thus, they are entitled to refunds on tariffs paid that the Supreme Court has found unconstitutional. To put this strong decision into practice, the judge “directed” U.S. Customs and Border Protection (CBP) Protection to “liquidate” the entry of duties, either fully paid or not yet fully paid, to importers “without regard to IEEPA duties.”

In addition, the Chief Judge of the CIT “indicated that [Judge Richard K. Eaton] will be the only judge who will hear cases pertaining to the refund of IEEPA duties. So there is no danger that another Judge, even one in this Court, will reach any contrary conclusions.” While this is unusual, as the decision states, “[t]o find otherwise would be to thwart the efficient administration of justice and to deny those importers who have filed suit the efficient resolution of their claims, and to deny entirely importers who have not filed suit the benefit of the Learning Resources decision.” While Judge Eaton’s docket may be busy, the procedure will avoid any contrary rulings that might provide grounds for further litigation and delay.

Next Steps

The Administration seems likely to appeal the case and request a stay of its enforcement (which would permit the Government to keep the tariff money pending the final outcome of the case). It could argue that the CIT erred in citing legislative history in deciding the case as well as the actual text of the Customs Courts Act. But the Administration would seem to have an uphill battle: the Supreme Court’s decision was clear and a contrary result would force all importers to file suit for the refund of duties the Supreme Court has ruled are unconstitutional rather than having that decision essentially be self-executing without litigation. Should the Government appeal, the Federal Circuit would have to decide whether to issue a stay pending hearing the case. But given that the Supreme Court upheld the Federal Circuit’s decision, the Federal Circuit could easily find grounds for denying a stay and requiring CBP to issue refunds quickly.

CBP will now have to react to the case, particularly if the Government loses an appeal to the Federal Circuit. While the intent of Judge Eaton’s decision seems to be that the refunds would be automatic, it is also possible CBP may require some additional procedures for importers to claim the refunds. It is now clear that the Supreme Court did not include language in Learning Resources on refunds at least in part because it did not want to get ahead of the Federal Circuit’s remand of the question on injunctions to the CIT. This is consistent with the Supreme Court’s general practice; normally, it likes to hear cases for which a full record, including lower court decisions, has been entered and then to rule on those decisions.

Conclusion

Given the possibility of an appeal, it may be some time before importers actually see the refunds in their accounts, and in the meantime, new tariffs such as the 10% global tariff (which the President has suggested could be raised to 15%) have been imposed and others may be imposed under other statutes with different tariff authority. But this very strong decision by the CIT leaves no room for doubt that the court believes refunds on the IEEPA tariffs are both justified for all importers, whether or not they have filed suit, and should be returned to importers quickly.

The Federal Circuit’s original remand may have helped the ultimate resolution of these cases –  and refunds to importers – by avoiding grounds for litigation that could have added to the time importers must wait to receive their refunds. Now, CBP must act, but importers should not have to file suit at the CIT to obtain the refunds they are clearly due.