The Trump Administration Will Not Give Back the Tariff Money It Illegally Collected

Alfredo Carrillo Obregon

In its latest move to keep tariff dollars illegally taken from American importers, the Trump administration announced on May 29 that it will appeal a court order to refund all importers the $166 billion it collected pursuant to the International Emergency Economic Powers Act (IEEPA) tariffs struck down by the Supreme Court earlier this year.

In ruling the IEEPA tariffs illegal, the Court left unmentioned the status of refunds for importers who had already paid the duties. On remand, and after more than 2,500 importers filed suits for refunds, Judge Richard Eaton from the Court of International Trade (CIT) issued a universal injunction, ordering US Customs and Border Protection (CBP) to refund all importers who had paid the tariffs. CBP responded that it did not have adequate systems in place to process the volume of refunds implicated by his order, but also assured the CIT that it was developing such a system. After being granted additional time by Judge Eaton to deploy it, CBP unveiled the “CAPE” tool in late March and began processing refund requests on April 20.

CAPE’s rapid deployment deserves credit, but the tool contains significant structural gaps in its current state. CAPE can process refunds of IEEPA tariffs only for entries that have been liquidated for no more than 80 days or that remain unliquidated. According to CBP, this covers about 63 percent of IEEPA-tariffed entries. In its latest progress report, filed before the CIT on May 26, the agency announced that $85 billion in refunds “have been accepted for processing in CAPE,” of which $20.6 billion have been approved for disbursement. While this progress is welcome, CBP has not yet announced a timeline for processing the remaining 37 percent of IEEPA-tariffed entries in CAPE. 

This foot-dragging prompted Judge Eaton to order on May 29 that CBP Commissioner Rodney Scott testify regarding the government’s intent to issue these refunds. CBP responded by announcing the government would appeal the universal injunction. Clearly, the government is not eager to give up this revenue.

CBP’s appeal would seek to limit refunds for entries liquidated for more than 80 days only to those importers that file suit at the CIT and obtain a refund order. As noted, more than 2,500 suits have been filed at the CIT. A verdict on appeal that Eaton’s universal injunction is invalid would thus burden the CIT with this caseload, and individual importers would need to go to court to access their refunds. More importantly, importers that have not yet filed suit—including small businesses that do not have the resources for protracted litigation (which, according to Judge Eaton, account for most of the entries not currently eligible for CAPE processing)—would face the question of whether to incur these costs or simply forgo the possibility of getting their money back. 

It is also not clear at this point whether the appeal would compromise refunds for importers whose entries are currently being processed or are eligible for processing by CAPE, but it could delay their distribution.

Whatever the legal merits of the CIT’s universal injunction, the fact remains that the government took billions of dollars from American businesses through an illegal tariff regime. Holding on to this money by using procedural hurdles to deny importers their legally owed refunds should not be allowed. Courts allowed the administration to keep collecting these duties after assurances that the government would issue refunds if the tariffs were struck down. They should now hold them accountable for doing so.