In a setback for the Trump administration, a federal judge in New York ruled on Wednesday that companies that paid tariffs struck down last month by the Supreme Court are entitled to refunds. Judge Richard Eaton of the US Court of International Trade stated that “all importers of record” are “entitled to benefit” from the Supreme Court ruling that invalidated sweeping double-digit import taxes imposed by President Donald Trump last year under the 1977 International Emergency Economic Powers Act (IEEPA).
Supreme Court Declared Tariffs Unconstitutional
The Supreme Court ruled that the tariffs were unconstitutional under the emergency powers law. These included sweeping “reciprocal” tariffs that were imposed on nearly every other country.
The majority held that the president could not unilaterally set or change tariffs, noting that the power to levy taxes clearly belongs to Congress.
Court to Handle Tariff Refund Cases
In his ruling, Eaton stated that he alone “will hear cases pertaining to the refund of IEEPA duties.”
The decision provides some clarity regarding the tariff refund process, which was not addressed in the Supreme Court’s February 20 ruling.
Trade lawyer Ryan Majerus, a partner at King & Spalding and a former US trade official, said he expects the government to appeal or “seek a stay to buy more time for US Customs to comply.”
Government Could Face USD 175 Billion in Refunds
The federal government collected more than USD 130 billion in the now-defunct tariffs through mid-December. According to estimates by the Penn Wharton Budget Model, the total refunds could reach USD 175 billion.
Judge Eaton was ruling on a case brought by Atmus Filtration, a Nashville, Tennessee-based company that manufactures filters and other filtration products, which claimed a right to a tariff refund.
How the Refund Process Works
All goods that pass through US Customs and Border Protection enter a process known as “liquidation,” during which the agency issues its final accounting of what is owed.
Once liquidated, importers have 180 days to formally contest the duties. After that period, the liquidation becomes legally final.
The judge ordered customs officials to stop collecting the IEEPA tariffs that were struck down by the Supreme Court for goods currently going through the liquidation process. If goods have already passed that stage, the agency must recalculate the duties without the tariffs.
Legal Experts Weigh In
“This is a great decision for importers and consumers who paid,” said Barry Appleton, a law professor and co-director of New York Law School’s Center for International Law.
“It will make customs brokers busy. It should make things easier for the courts and start a process for those importers who paid within the last 180 days.”
Next Steps in the Refund Process
Earlier this week, another federal court rejected the Trump administration’s attempt to slow down the refund process.
The US Court of Appeals for the Federal Circuit has already initiated the next phase by sending the matter to the New York trade court for further proceedings.
The US Customs and Border Protection agency must now establish a mechanism to process the refunds.
While customs authorities routinely issue refunds when errors occur, trade lawyer Alexis Early, a partner at Bryan Cave Leighton Paisner, said the system was “not designed for a mass refund.”
“The devil will be in the details of the administrative process,” she added.
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