On February 20th, the U.S. Supreme Court decided in Learning Resources Inc. v. Trump and V.O.S. Selections v. United States that the President’s International Emergency Economic Powers Act (IEEPA) tariffs were unlawful and exceeded his authority. However, the Court declined to specify how refund procedures should proceed, leaving a future nightmare for the government and taxpayers.
In a March 6 order, Judge Richard K. Eaton of the Court of International Trade (CIT) said that U.S. Customs and Border Protection (CBP) collected around $165 billion from the tariffs imposed under IEEPA. The amounts paid must be refunded, with interest of approximately $650 million for each month the refunds are not issued.
The problem is that no one knows how to process the refunds. There is still no indication of what data importers must submit with their refund declarations, which entries will qualify for refunds, or even a timeline for when the CBP will process the refunds.
Hundreds of companies have initiated federal lawsuits to obtain refunds of IEEPA tariffs.
In a March 6th motion filed before the CIT in Atmus Filtration Inc. v. USCBP, a CBP official claimed that it needed an additional 45 days to create a system to process more than 53 million entries related to the IEEPA tariffs to provide refunds. According to the motion, CBP does not have the technology or manpower required for processing, and diverting additional resources would take resources away from systems that “serve to mitigate imminent threats to national security and economic security.”
Many suggest that rolling out a phased refund system is the only way to handle the volume of refunds properly. But there is a fear that a phased rollout would merely be a way of keeping Judge Eaton’s order suspended by showing progress without actually completing the full task.
As courts and companies work through the logistics, importers are pondering how to refund their customers. Once the government ultimately decides how to issue refunds, companies will likely pass them along to customers on a case-by-case basis.
The refunds may depend on the terms of the applicable contracts, consumer behavior, or various other factors.
Companies like FedEx, that can identify the customer and product entry, may have better luck in providing refunds. However, most importers will have a great deal of trouble connecting an import entry, which could have hundreds of thousands of parts, to a particular customer, and trying to do so would probably become an exercise in futility.
Let me leave you with this…
I’ll bet you dimes to donuts that very few companies or consumers will ever see a dime of this money.
You and I both know that the government doesn’t want to give it back to anyone. As such, they’re probably devising new and more exotic ways of filing lawsuits that might negate the original order, rendering the tariffs lawful.
If that happens, they could keep the money.
And even if, by some wild hallucination they do refund the money, most companies will never see a dime of it. Think about the logistical nightmare this is creating.
If someone imported a container load of 10,000 parts, and you purchased a few of those from a wholesaler, do you really think you’ll get any of that money? Good luck. I wish you well in your quest.
We’ll see what happens on this one. I’ll keep you informed as the story progresses.
As always, if you’re having problems with your accounting and tax work, please call.
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Chris Amundson
President
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