As US Customs refines its tariff refund system, who gets in to apply is under dispute
NEW YORK (AP) — A federal judge questioned a U.S. Customs and Border Protection official Tuesday about the government's process for refunding billions of dollars in tariffs that importers paid before the Supreme Court ruled that President Donald Trump illegally imposed higher duties on goods from most other countries.
Court of International Trade Judge Richard Eaton said he wanted to hear details that would help him decide whether to order the government to speed up and expand its system for issuing tariff refunds.
Eaton praised the online system that CBP developed to process refund claims, saying it was working well and that he believed the government wanted to return all of the import tax money it collected without constitutional authority to do so. But he said a Justice Department appeal of his order requiring the agency to refund all companies that paid tariffs, not just those that filed lawsuits, threatened to derail 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 pushed by the government may not be in the government's best interest.”
The Justice Department is arguing that only companies that were parties in any of the more than 4,000 lawsuits that challenged the legal mechanism Trump used to set higher tariff rates were entitled to seek refunds. That question is now in the hands of the U.S. Court of Appeals for the Federal Circuit.
Eaton ordered Customs and Border Protection in March to create a system by which “all importers of record” could apply for their share of the $166 billion CBP estimated it had collected before the Supreme Court struck down the global tariffs. But he allowed the agency to roll out the system in phases while it developed the necessary technology to handle various kinds of refund claims.
The agency launched the online system April 20, saying it would first review applications from importers whose tax bills had not been finalized. Eaton scheduled Tuesday's hearing to help him weigh whether he should compel CBP to refund all the money the government owes immediately or give the agency more time.
The pace and scope of the process became a contentious matter, however, 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 objected and asked if one of Scott's deputies could attend the hearing instead.
When Eaton insisted on hearing directly from the head of the agency, Justice Department lawyers appealed both that mandate and the judge's broader ruling on refund eligibility. Last week, the Federal Circuit agreed to temporarily suspend the requirement for Scott to testify. Susan Thomas, CBP’s executive assistant commissioner for trade, appeared before Eaton instead.
The hearing focused on CBP's capability and willingness to open the refund process to companies with tariff payments that date back the farthest.
Claims for refunds totaling $90 billion had been accepted for processing as of Tuesday, and the agency has directed the Treasury Department to issue $23 billion in refunds, Thomas told the judge.
So far, CBP has limited applications to businesses that either did not have their tax bills finalized by the time the Supreme Court invalidated Trump's “reciprocal” tariffs in late February or whose bills had been settled within the preceding 80 days.
Thomas said CBP was developing a way to handle refunds involving older shipments that was likely to be finished by the end of July. But she said the agency would not process cases beyond the 80-day window while Eaton's order requiring refunds for all duty payers is on 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% 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.
Lawyers for the five companies behind the lawsuit that produced the judge's order said $11 billion was still a lot of money, and it would be unconstitutional for them to pay less tariffs than other companies that also paid the invalidated duties, which the Supreme Court held Trump improperly imposed by citing an emergency powers law to usurp Congress' taxmaking authority.
One of the plaintffs' lawyers said a possible solution would be for Eaton to certify their case as a class action on behalf of “potentially tens of thousands of identically situated importers.”
Eaton said that question would need to wait for another time, and he did not make any rulings Tuesday. He added that “it would be disappointing if we have to find our way into the world of class action” instead of allowing CBP to make progress that would ultimately accomplish the goal of his broad order requiring 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.”
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