By Jill Hurley
So, now what?
That was the question on everyone’s mind on the morning of February 20 when the U.S. Supreme Court publicized its ruling that the International Emergency Economic Powers Act (IEEPA) could not be used to impose tariffs on imports into the U.S.
There were so many questions. Will there be refunds issued? If so, will all importers be eligible? What will the process be? When will it happen? Who decides? Will there be more tariffs, more disruption?
Along with the questions came the inevitable flood of speculation about what might be. So many maybes based on this variable or that.
Here’s the truth. No one really knows. Attempting to answer questions for which there are no answers is an exercise in futility (albeit a somewhat cathartic exercise among those of us in the trade community as we wait for guidance from customs officials).
The unknowns can be frustrating, particularly if you’re an importer who has outlaid a substantial amount of money in customs duties. You want that money back, and you want it back as soon as possible. That’s understandable.
But in the absence of information, the best thing you can do is focus on what is known and what you can control.
Step 1: Preparing for the refund process
Will IEEPA duties be refunded? That’s a matter for the U.S. Court of International Trade to determine. How will they be refunded? That’s up to U.S. customs officials and we don’t know how quickly that might happen.
There’s the big bang theory that U.S. Customs and Border Protection (CBP) will just flip a switch and give back all the money it collected. That’s possible. But there are a lot of complexities when it comes to refunds, and CBP is likely to employ its existing refund process. What we do know is that an existing process for refunds already exists in the form of post-summary corrections and protests. Preparing for that refund process today will make getting refunds later much easier. Here’s how:
Compile all the data you can access from the Automated Commercial Environment (ACE). This data is far more insightful and detailed than data from an Enterprise Resource Planning (ERP) system or a customs broker’s report.
Step 2: Sort it out
Once that data is available sort by line all the entry lines that have a Chapter 99 classification that is specific to an IEEPA tariff program where duties have been paid.
While doing this, take the time to ensure those entries are accurate with respect to classification and country of origin, because changing that could significantly impact once the IEEPA tariffs are removed (more on that below).
Step 3: Get your paperwork in order
Here’s where that step of ensuring accuracy of entries comes into play, particularly when it comes to classification, valuation and origin. Once an IEEPA refund has been processed, all those data elements will determine the duty obligations associated with the other tariffs in the stacking regime. Knowing what percentage of your product is made with U.S. steel aluminum could mean significant dollars should those Section 232 tariffs be applied, based upon data identified that needs correction from the original entry.
If your entry has been liquidated, requesting a refund will require filing a protest, which will require submission of the entry summary, commercial invoice, customs invoice and bill of lading. When you’re compiling your data (as outlined in Step 1), you’ll need to stress-test your customs record-keeping system to ensure this information is accessible.
Let’s talk timing
Everyone wants a refund immediately, but with no official process announced yet, there’s little value in filing protests for liquidated entries as they be unnecessary in whatever process the CBP decides to roll out.
Similarly with duty drawback. There’s no definitive guidance on what impact duty drawback—be it previously issued or currently in review—might have on the status or timeliness of an IEEPA refund. There are hypotheses out there, but not something on which to base a business decision.
Once CBP announces a process, and if that process allows for the filling of protests, those protests should be ready to go.
What about those soon-to-be-liquidated entries?
The IEEPA tariffs against Canada and Mexico were implemented just less than a year ago. In some cases, the 300-day liquidation period for customs entries has already passed and more entries will be liquidated in the coming days and weeks as we all await guidance from the CIT and CBP.
Many businesses are actively looking to file protective protests to protect their entries against liquidation. It’s a good insurance policy. There is recent legal precedent that the time required for government or agency administrative processes to be established does not impact the qualification of a refund, so it’s possible those protective protests may be made in vain. But we simply won’t know until we know, and then it’s too late. Businesses looking to take the just-in-case approach can talk to their customs brokers about filing protective protests.
Wait. There’s more.
There is currently a bill being introduced in Congress that would require businesses who neutralized the cost of IEEPA tariffs by passing the cost down to the consumer to contribute to a fund that would reimburse consumers for the additional expense.
The legislative process is slow and even if the bill passes, it may not happen for months and may not be implemented until months after that. But for those importers who have been passing IEEPA costs down to consumers, it might be a good idea to start building a fund with those refund cheques, just in case.
As the days pass, more information will become available to answer questions, and more questions will arise out of the new information being made available. The process can be frustrating and time-consuming, which is particularly challenging for businesses with limited cash flow.
There’s little that can be done to speed up the process. We will all need to be patient. As the saying goes, patience is bitter, but its fruit is sweet.
Jill Hurley is Senior Director, Global Trade Consulting 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.