Judge Orders US to Stop Calculating Importers’ IEEPA Tariffs (1)

A US judge has ordered that the Trump administration halt a key step in the tariff payment process in order to make any refunds simpler after the US Supreme Court struck down the president’s global levies.

In an order on Wednesday, Judge Richard Eaton, who sits on the federal trade court in New York, ordered Customs and Border Protection to stop calculating President Donald Trump’s emergency tariffs on importers’ customs paperwork. He also questioned why the government was continuing to do so after the Supreme Court ruled the tariffs illegal.

Eaton also ordered officials to recalculate certain duties that had passed that step of the customs process, removing Trump’s contested tariffs. The judge confirmed that he has been assigned to handle all of the thousands of refund lawsuits filed in the trade court to date.

“The law is clear,” Eaton said during a hearing, adding later that he believes the refund process can be carried out “pretty smoothly.”

In a 6-3 decision, the Supreme Court last month found that Trump unlawfully used the International Emergency Economic Powers Act, or IEEPA, to impose so-called reciprocal tariffs on goods entering the country. Since then questions have swirled around when and how importers may get refunded more than $100 billion in IEEPA tariffs.

Read More: Trump’s Global Tariffs Struck Down by US Supreme Court

A Justice Department spokesperson declined to comment due to the ongoing litigation. The White House didn’t immediately respond to a request for comment.

“This order confirms what should have been obvious after the Supreme Court’s decision: Everyone that paid IEEPA tariffs is entitled to a refund,” said Pratik Shah, the lead lawyer for Learning Resources Inc., one of the companies that won the Supreme Court case.

Read More: The Toymaker Behind Trump’s Supreme Court Tariff Loss

During the Wednesday hearing in a packed Manhattan courtroom, Eaton denied a request from Justice Department lawyer Claudia Burke to put his order on hold while the US appeals. The judge set another hearing in the matter for Friday morning and told the Justice Department to be prepared to explain in greater detail how the refund process may play out.

Tariff Paperwork

The hearing and order came in a low-profile lawsuit filed by Atmus Filtration Inc., a Nashville, Tennessee-based manufacturer that’s seeking about $11 million in IEEPA refunds. The case took on greater importance after Atmus raised a crucial question about how tariff paperwork is being handled following the Supreme Court’s ruling.

Thomas Wallrich, a lawyer for Atmus, declined to comment on the order.

During the hearing, the judge said that the refund process should “not result in a mess” and that “every single cent of IEEPA duties that was imposed must be refunded.” He also questioned why the process cannot be carried out through the government’s existing procedures for tariff refunds, which he said the US issues every day.

Burke, the Justice Department lawyer, said the refund process will take time because various government agencies impacted by the Supreme Court’s order have yet to issue their final position on what comes next. But the judge said he does not think the administration requires much time because the issue is already settled.

“The Supreme Court told you what your position is,” he said. “Your position is that you are going to refund that money.”

Burke pushed back, saying it is not the government’s position “that every single importer will get a refund” because some may “have to file a claim in this court.” The back and forth signaled a potentially drawn out fight as the judge seeks to streamline the process.

Refund Process

At issue is a Customs and Border Protection process known as liquidation, which is when an importer’s duties and tariffs — paid months earlier based on estimates — are formally calculated and finalized. Under questioning from the judge, Burke confirmed that Customs is continuing to liquidate import entry paperwork to include IEEPA tariffs, all but ensuring the refund process for those importers will be more complicated.

Under the judge’s order, the liquidation process can only be completed going forward without IEEPA tariffs and many liquidations that were already completed must be reversed.

More than 2,000 refund lawsuits are pending in the trade court, nearly all of which were filed after the Supreme Court heard arguments in November. The government has previously said in court filings that hundreds of thousands of importers have paid the contested tariffs, however.

Earlier on Wednesday, the government confirmed to Eaton in a written submission that it would pay interest on any refunds that it ultimately was required to make.

(Updates with details from the hearing starting in the fourth paragraph.)

To contact the reporters on this story:
Erik Larson in New York at elarson4@bloomberg.net;
Zoe Tillman in Washington at ztillman2@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Ben Bain

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