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Judge Orders CBP to Report its Progress to Developing Refund Process by Thursday

Judge Orders CBP to Report its Progress to Developing Refund Process by Thursday

By John H. Kester

The Court of International Trade (“CIT”) on Friday ordered that the government file a report on the progress Customs and Border Protection (“CBP”) has made toward developing a refund process for IEEPA duties, with interest, by 2PM EDT on Thursday, March 12. That Friday Order follows another Order (the “Reaccounting Order”) last week in same case, Atmus Filtration, Inc. v. United States, et al., which had required that:

1. for entries subject to IEEPA tariffs imposed by the Executive Orders considered by the Supreme Court in Learning Resources, Inc. v. Trump, that have not liquidated, CBP must liquidate those entries “without regard to” the IEEPA duties; and,

1. for entries subject to IEEPA tariffs imposed by such Executive Orders that have liquidated, but for which the liquidation is not final, CBP must reliquidate those entries, “without regard to” the IEEPA duties.

Senior Judge Richard Eaton’s Order was not limited to entries in the Atmus case, but rather applied to all entries described above. Notably, the above limitation to Executive Orders considered by SCOTUS in Learning was added in an Amended version of the Order on March 5. Although Learning resulted in a sweeping ruling that IEEPA did not authorize the President to tariff, the ruling did not reference, for example, the tariff imposed by Executive Order 14323 on Brazilian imports and other E.O.s, meaning Atmus has left importers affected by those tariffs in an uncertain position.

Moreover, although the Atmus Court ordered such reaccounting, it stopped short of requiring refunds, and even the reaccounting Order was suspended on Friday to caveat that the Court is not requiring immediate reaccounting. Also on Friday, a CBP representative filed a Declaration with the Court stating that CBP was incapable of immediate compliance, but that CBP was “confident” that it can make changes to its system to address removing the unlawful tariffs and was “making all possible efforts to have this new… functionality ready for use in 45 days.”

Even if CBP can accomplish those changes to its system within that 45-day period  that does not mean refunds will occur within that timeline. Indeed, it is unclear whether CBP’s filing was merely describing how a refund process would work or whether it signaled that the CBP was acquiescing to refunding the unlawfully collected tariffs.   As noted above, the government is required to file a progress report regarding how refunds would be handled by March 12.

Recent History of Atmus:

Wednesday, March 4:

The Hearing:

• In a hearing in Atmus, the Senior Judge made plain the Court’s overarching posture in favor of refund: “Right now I want to make it clear to the Customs Service that they have to refund any money that was unlawfully collected,” he said.
• The government appeared to be caught off-guard by the Court’s intention to take broad action, and requested from the Court more time to brief the merits of its case. “There aren’t any merits,” the Senior Judge said.
• Although the government asserted at the Wednesday hearing that entries would require manual review, the Senior Judge said, “we live in an age of computers….”
• The Senior Judge announced that he would require a conference Friday to discuss how refunds would be accomplished for “at least some of these entries.” He noted that all IEEPA cases were to be assigned to him personally and that he does not want to hear the all of cases filed.

The Order:

• Following the Hearing, the Judge issued an Order requiring reaccounting of entries with IEEPA duties imposed, which stopped short of explicitly requiring refund but which appeared to be an effort to start a refund process in some form.
• The Court took pains to assert that the Order would apply to all importers of record whose entries had IEEPA tariffs imposed, rather than merely to the Atmus “All importers of record whose entries were subject to IEEPA duties are entitled to the benefit of the Learning Resourcesdecision,” it said.
• The Order did not state how entries whose liquidation is final would be treated.

Thursday, March 5:

              The Amended Order:

• The Senior Judge amended and superseded his Wednesday order to add language limiting the reaccounting to those IEEPA tariffs imposed by Executive Orders considered by the Supreme Court (“SCOTUS”) in Learning.
• Application of the Order only to Executive Orders considered by SCOTUS in that case means that the Order does not apply to some IEEPA tariffs including those imposed by certain Executive Orders related to Brazil, Cuba, Iran, Russia, and Venezuelan oil.

Friday, March 6:

              The Declaration:

• The government filed a Declaration by a CBP representative, which asserted there are numerous limitations in the Automated Commercial Environment (“ACE”), the Customs system that handles entries and associated duties, and that refund processing would take “4,431,161 man hours” (approximately 506 years) using the existing tools.
• It nonetheless stated that CBP would endeavor to have changes to the system ready in 45 days.

                             The Orders:

• In addition to the aforementioned Order setting a March 12 progress report deadline, and citing the aforementioned Declaration, the Court stated that the March 5 Order was “suspended to the extent that it directs immediate compliance.” Put differently, the reaccounting must take place, but on an indefinite timeline.

 

Next Steps for Importers:

The CIT’s posture in favor of refunding importers has never been clearer, and it appears that its desire is for such process to occur without requiring aggrieved importers to file complaints with the Court. However, the Friday conference in Atmus was private, and the government’s public posture independent of today’s Declaration has suggested it is not eager to facilitate an easy and immediate refund process.

It remains to be seen whether the government will appeal in Atmus, taking the refund issue to higher Court(s) in similar fashion to how the illegality of the tariffs was adjudicated. It also remains to be seen what process, if any, will be available to importers affected by IEEPA-based tariffs that SCOTUS did not consider in Learning, and importers whose liquidated entries are final.

Although there is reason to believe that the CIT favors refund without the need to file a complaint, at least for many IEEPA-implicated entries, there also is good reason to expect the government to resist. With that in mind, GKG Law’s position remains that the most conservative approach is to file a Complaint for refund before the CIT.

GKG Law’s IEEPA tariff litigation team, which includes me, Brendan Collins, and Oliver M. Krischik, has already filed numerous such complaints prior to the SCOTUS ruling, and is prepared to continue to do so swiftly in the days ahead.

Please contact us if you have any questions or are interested in filing such a Complaint.

John H. Kester is a Customs attorney with GKG Law. He additionally passed Customs and Border Protection’s rigorous Customs Broker License Exam and his application for a Customs Broker License is pending. He is reachable at jkester@gkglaw.com.

Brendan Collins and Oliver M. Krischik, Principals with GKG Law, additionally participated in the firm’s numerous filings in opposition to the Section 301 tariffs implemented by President Trump’s first administration. They are reachable at bcollins@gkglaw.com and okrischik@gkglaw.com respectively.