NEW YORK — In a setback for the Trump administration, a federal judge in New York decided on Wednesday that businesses are entitled to refunds on tariffs that the Supreme Court recently invalidated.
Judge Richard Eaton of the U.S. Court of International Trade stated that “all importers of record” should “benefit” from the Supreme Court’s decision to invalidate the substantial tariffs President Donald Trump imposed last year under the 1977 International Emergency Economic Powers Act (IEEPA).
The Supreme Court deemed those tariffs unconstitutional, including the comprehensive “reciprocal” tariffs imposed on nearly every other country. The majority opinion clarified that the president does not have the authority to set and modify tariffs unilaterally, as the power of taxation is reserved for Congress.
In his decision, Eaton specified that he will personally oversee cases related to the refund of IEEPA duties. This ruling provides some guidance on the tariff refund process, an aspect the Supreme Court did not address in its February 20 decision. Trade attorney Ryan Majerus, a partner at King & Spalding and a former U.S. trade official, anticipates that the government might appeal or request a stay to allow more time for U.S. Customs to comply.
The federal government had collected over $130 billion from these now-overturned tariffs by mid-December, and it might have to issue refunds totaling up to $175 billion, according to estimates from the Penn Wharton Budget Model.
Eaton’s ruling specifically addressed a case brought by Atmus Filtration, a Nashville, Tennessee-based company specializing in filters and filtration products, which sought a refund on tariffs paid.
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All goods that go through U.S. Customs and Border Protections enter a process called “liquidation,” when the agency issues its final accounting of what is owed. Once liquidated, importers have 180 days to formally contest the duties. After that window closes, the liquidation is legally final.
The judge ordered customs to stop collecting the IEEPA tariffs the Supreme Court struck down last month on goods going through the liquidation process. And if the goods were past that part of the process, the agency would have to recalculate them without the tariffs.
“This is a great decision for importers and consumers who paid,” said Barry Appleton, a law professor and co-director New York Law School’s Center for International Law. “It will make customs brokers busy. It should make things easier for the courts – and get a process underway for those importers who paid within the last 180 days.”
On Monday, another federal court rejected the Trump administration’s attempt to slow the refund process. The U.S. Court of Appeals for the Federal Circuit started the next phase in the refund process by sending it to New York trade court to sort out.
Now the U.S. Customs and Border Protection agency must come up with a way to process the refunds. Customs routinely refunds tariffs when there’s been some kind of error, but its system was “not designed for a mass refund, said trade lawyer Alexis Early, a partner at Bryan Cave Leighton Paisner. “The devil will be in the details of the administrative process.
Anderson reported from New York.
AP Writer Lindsay Whitehurst contributed to this story.
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