Time is of the essence for U.S. importers who may be entitled to an IEEPA refund.
U.S. importers that have been waiting gleefully for the return of the funds they paid to U.S. Customs and Border Protection for tariffs issued under the International Emergency Economic Powers Act (IEEPA) may now have some cause for concern.
When the U.S. Supreme Court announced in late January that the imposition of tariffs through IEEPA was unlawful and that duties collected through those tariffs must be returned, importers rejoiced, believing it was only a matter of time before their funds would be returned.
But recent events have robbed importers of that certainty and now each passing day without action could mean the loss of recoverable duties already paid. Importers will need to act fast to secure their refunds.
What happened and why?
In response to the U.S. Court of International Trade’s (CIT) initial ruling that CBP had to issue refunds for all IEEPA duties collected, U.S. Customs and Border Protection filed a stay so that it could have time to create a system through which to issue refunds. The CIT granted the stay, allowing CBP the time to create the Consolidated Administration and Processing of Entries (CAPE), an online system for importers to apply for IEEPA refunds. The program was to be carried out in phases with the first phase dealing with the least complex entries (i.e., unliquidated and uncontested entries). Entries that were 80 days past liquidation would be reserved for subsequent phases, the process and review criteria for which would be established at a later date.
For those interested in the day-to-day drama between CBP and the CIT, a quick online search will provide all the details. For this space, suffice to say the CIT decided it was dissatisfied with the pace at which CBP was issuing IEEPA refunds, as well as the fact that most refunds issued to date were primarily to large enterprises. But that’s not quite it. The CIT had also grown impatient with what it viewed as CBP’s growing evasiveness around how it would handle liquidated and protested entries and its subtle hinting that those entries might not be refunded. The CIT pressed CBP on those liquidated entries, particularly many of the low-value entries filed by small businesses, and ultimately suggested it would lift the stay from its initial ruling, which would then require CBP to issue refunds for all IEEPA entries right away.
But wait … CBP has something to say about this
In response to the CIT’s suggestion that it might lift the stay to its original order, CBP filed an appeal with the Court of Appeals for the Federal Circuit (CAFC). The agency’s argument is that, for importers that did not participate in the IEEPA litigation, the CIT doesn’t have the authority to force CBP to give back duties (aside from the actual litigants of the case), Congress did not grant authority to CBP to pay refunds on entries that are liquidated and final for non-litigants, and that CBP doesn’t have processes or means to refund any entry that has aged 80 days beyond liquidation. In other words, those refunds would be quickly evaporate and importers who did not participate in the IEEPA litigation would have no recourse to get them back. That could mean lots of lost money for importers who had been given hope their paid duties would be returned to them. That’s particularly true for smaller business that imported low-value goods in high volume.
What’s the impact to importers eligible for IEEPA refunds?
This will ultimately depend on how the courts rule throughout the appeals process. A ruling in CBP’s favor would mean things revert back to the where they were in mid-May with CBP continuing to issue refunds for unliquidated entries and reserve announcement on all other entries for the future.
A ruling against the CBP would almost certainly result in the matter being brought before the Supreme Court, which had refrained from opining on how or whether IEEPA duties should be refunded when it ruled the IEEPA tariffs to be unlawful. Should the courts rule against CBP, the outcome would be that CBP would have to liquidate or reliquidate all IEEPA entries and issue refunds immediately.
That’s easier said than done. There’s no precedent for this volume of duty refunds and exactly how CBP would go about issuing these refunds en masse is still very much up in the air.
Importers who have already filed CAPE applications and received their refunds will ultimately be unaffected. But what that process looks like for those who have not yet filed CAPE entries, or have filed but not yet received a refund, remains unclear.
What should importers eligible for IEEPA refunds do now?
While every business’s circumstances are unique and legal counsel should be consulted as necessary, importers should be acting fast. With the outcome of this latest legal tête-à-tête unknown, and the looming possibility that it could result in CBP no longer issuing refunds for entries 80 days past liquidation, every passing day could result in an importer leaving money on the table.
That’s because each passing day brings entries to which IEEPA had been applied closer to that 80-day-past-liquidation threshold. That’s particularly true for those low-value shipments that are liquidated almost immediately. Importers who had been procrastinating in gathering the Automated Commercial Environment (ACE) data required to file their CAPE applications (or asking their customs brokers to do so on their behalf), should move quickly. Time is money. Literally.
What’s next?
As with all legal matters, these things take time. There is currently no date set for CBP’s appeal hearing and with the summer almost in full swing, it could be some time before it takes place. A subsequent appeal to the Supreme Court could take even longer. That means there will be an air of uncertainty around IEEPA refunds for several months, putting importers impacted by IEEPA right back to where they were at the outset of the calendar year.
The hope is that they’re not still living with that uncertainty at the outset of the next calendar year.
Jill Hurley is Senior Director, Global Trade Consulting, U.S. at Livingston, and a non-practicing licensed attorney specializing in trade. As the practice leader, she spearheads U.S. import and export projects, offering comprehensive reviews of clients’ business models for risk assessment, crafting, and implementing import/export compliance programs, conducting audits, navigating export licensing requirements, and providing support in U.S. trade remedy matters.