Companies’ Tariff Refund Calculus May Change With These Factors

Importers could potentially recoup approximately $166 billion of tariffs, plus interest, that they previously paid on goods subject to tariffs imposed by President Donald Trump under the International Emergency Economic Powers Act (IEEPA) after the US Supreme Court ruled them unlawful.

The Feb. 20 decision invalidated both the “drug trafficking” tariffs imposed on goods from Mexico, Canada, and China, and the “reciprocal tariffs” imposed on goods from nearly all countries around the world.

Though it’s very likely that importers who paid IEEPA tariffs will be entitled to a refund, the timeline for any such refund remains uncertain and dependent, in part, on litigation before the Court of International Trade (CIT).

Less-Known Refund Opportunities

Several common scenarios exist where importers may qualify for refunds but fail to act.

Brazil and India Tariffs. The tariffs at issue in the cases before the Supreme Court didn’t consist of all IEEPA tariffs. Not before the court were IEEPA tariffs imposed on goods from Brazil (related to alleged human rights and election-related concerns) and India (related to the purchase of Russian oil).

But the sweep of the Supreme Court’s ruling that IEEPA doesn’t provide tariff authority to Trump makes it certain that these IEEPA tariffs too are unlawful. Companies seeking refunds should include those India and Brazil IEEPA tariffs.

Reliquidation. Importers may believe that nothing can be done for entries that have “liquidated”—the process through which imports are administratively finalized. But this is not necessarily the case. In fact, a recent order from the CIT directed reliquidation of certain liquidated entries, and the government previously told the CIT that it wouldn’t challenge the court’s authority to order reliquidation.

Interest. It’s very likely that refunds will come with interest, a point the government seemingly has conceded in recent filings before the CIT. Companies understandably will factor in the resources and costs of obtaining refunds, and some who have paid a smaller amount of IEEPA tariffs may decide that recouping them isn’t worth the effort and expense.

Companies may also opt to move on out of fear that any refunds could be tied up in litigation for years. In both cases, the calculus may change if they actively factor in the interest component. The interest component removes any incentive the government would have to intentionally drag out the process if it assesses that it will be required to pay refunds eventually.

Pursuing Refunds

Companies should consider adopting a “belt-and-suspenders” approach to tariff recovery. The belt consists of filing administrative protests within 180 days from the date of liquidation of an entry. The suspenders are the filing of a case at the CIT.

Filing protests is necessary to keep the entries alive and open. When filing protests, companies can request a suspension until there is a resolution of the litigation at the CIT. This may prevent importers from having to fully pursue refunds on two separate tracks, while at the same time ensuring they aren’t accused of failing to exhaust available administrative remedies, which could become a bar to recovery.

An action at the CIT maximizes chances of recovery by protecting against the uncertainties of this novel situation, for example, the still-active question about the court’s power to order relief across the board, including for non-litigants. A case may also potentially shorten the timeline to receive refunds.

Deadlines

Several critical timing and procedural requirements can determine whether companies preserve their refund rights. Companies should carefully monitor the “liquidation date” for each of their entries and file a protest for entries before the 180-day period expires.

Whether a timing deadline exists for filing a case at the CIT is less clear. The CIT is actively managing the case from the Supreme Court now back on remand, as well as thousands of other cases. As this work continues, developments may weaken an importer’s claim legally given that the CIT is a court of limited subject matter jurisdiction and the cases are being filed under the court’s residual jurisdictional grant in 28 U.S.C. 1581(i), or may delay recovery. The safest course is to file a case now.

Companies must ensure they are signed up for electronic refunds, as this is the only way CBP will process refunds as of early February this year.

Assess, Then Coordinate

In-house counsel should consider several proactive steps to assess potential claims and coordinate across legal, trade, and finance teams.

First, companies should determine whether to file a lawsuit with the CIT. This is particularly important because, in the case that went to the Supreme Court, the government previously took the position that the court can only order relief for the named plaintiffs, and the scope of relief within the court’s power to order remains a live issue.

Second, companies should actively monitor liquidation dates for all relevant entries and file protests in each case before the 180-day period expires.

Third, companies must verify enrollment in electronic refunds, which is a prerequisite for receiving any refunds from CBP.

Fourth, importers that passed tariffs on to their customers should consider how to handle any inquiries they may receive from customers about sharing refunds.

Fifth, companies should consider the tax implications of refunds, including how the income will be realized on their books.

Finally, in-house counsel are encouraged to maintain close coordination with outside trade counsel to remain aware of any developments in the ongoing litigation so that they can take advantage of any administrative mechanisms for claiming refunds or other procedural steps that may become required to receive refunds.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Elyssa Kutner is partner of DLA Piper’s national security and global trade practice who advises clients on US customs law, import compliance, and trade enforcement issues.

Brian Janovitz is partner of DLA Piper’s national security and global trade practice, focusing on tariffs, trade enforcement, and international economic policy.

Julia Kim is an associate of DLA Piper’s national security and global trade practice and represents multinational clients on international trade and national security‑related regulatory matters.

Christine Daya contributed to this article.

Write for Us: Author Guidelines