Recent Developments Highlight the Benefits of Litigation for Preserving Tariff Refund Rights

As the U.S. Supreme Court considers the legality of sweeping tariffs imposed by President Trump under the International Emergency Economic Powers Act (“IEEPA”), there has been uncertainty over the best way to preserve rights to tariff refunds—especially with respect to entries that U.S. Customs and Border Protection (“CBP”) will liquidate prior to issuance of the Supreme Court’s decision—if the challenged IEEPA tariffs are eventually ruled to have been unlawful. Based on recent developments at the U.S. Court of International Trade (“CIT”), this alert highlights the advantages for importers of record of filing a complaint as a means to preserve the right to claim tariff refunds even as to their earliest entries.

Since the Supreme Court’s argument in November, more than 1,600 companies have filed lawsuits under the CIT’s residual jurisdiction under 28 U.S.C. § 1581(i) to challenge the legality of the IEEPA tariffs. The approaching liquidation dates of entries subject to the IEEPA tariffs prompted these lawsuits, given a risk that rights to refunds on liquidated entries could be lost. 

In December, the CIT in AGS Company Automotive Solutions v. United States declined to enjoin the liquidation of entries because (i) the CIT has authority in cases filed under § 1581(i) to order reliquidation of liquidated entries on which IEEPA tariffs were paid, and (ii) the U.S. government stipulated that it would not oppose plaintiffs’ future requests for reliquidation.

Separately, on December 23, the CIT issued an administrative order automatically staying all newly filed IEEPA refund cases until a final Supreme Court decision. Companies concerned about risks arising from liquidation nonetheless continued to file lawsuits.

In later submissions to the CIT, the U.S. government then confirmed that its stipulation not to oppose court-ordered reliquidation applies “to all current and future similarly situated plaintiffs.” This new stance, which the CIT has emphasized, makes clear that the U.S. government will be judicially estopped from opposing requests for reliquidation made by any companies that file suit prior to the Supreme Court’s forthcoming decision.

Despite the CIT’s decision in AGS, uncertainty remains about the process for issuance of refunds if the IEEPA tariffs are ruled unlawful. For example, it is unclear whether the actions of CBP in imposing the IEEPA tariffs will be treated by federal courts as a protestable agency action. While filing protests to preserve rights regarding liquidated entries is likely the most prudent course of action until that uncertainty is resolved, there may also be benefits from filing a lawsuit at the CIT prior to liquidation and issuance of the Supreme Court’s decision:

• Litigation preserves refund eligibility regardless of entry status: Once entries liquidate, refund options may be limited or unavailable; filing a lawsuit helps protect refund rights for both liquidated and unliquidated entries.
• The U.S. government’s position may shift: While the CIT has confirmed that the U.S. government’s stipulations regarding reliquidation will apply to similarly situated plaintiffs in future cases, the government has stated that this will not prevent it from challenging whether a future plaintiff is indeed “similarly situated,” and the government could decide to stop promising not to oppose reliquidation requests—for instance, in any cases filed after the Supreme Court rules, which the government may view as distinct from the initial wave of cases.
• Administrative remedies remain uncertain: Litigation does not preclude pursuing refunds through administrative means in parallel—for example, through filing post-summary corrections for unliquidated entries. However, litigation can mitigate uncertainty regarding the availability of administrative remedies, such as possible CBP unwillingness to extend liquidation, and the inability to use protests to obtain refunds of unlawful IEEPA tariffs. Moreover, where administrative remedies provide sufficient relief, litigation can be paused or withdrawn, but failure to file may foreclose certain refunds entirely.
• Early filers may be better positioned to recover more quickly: If the Supreme Court rules that the challenged IEEPA tariffs are unlawful, plaintiffs that filed early at the CIT may be better positioned to obtain swift refunds, depending on the process established.

Ultimately, a decision to file an IEEPA tariff refund action depends on a number of considerations, such as the import volumes at issue, tariff exposure, risk tolerance, expected entry status relative to the timing of any Supreme Court decision, and potential scrutiny by the Trump Administration as a result of commencing litigation. Companies that have paid meaningful IEEPA tariffs on entries that will soon liquidate should seriously consider filing lawsuits at the CIT under § 1581(i) as a means of preserving tariff refund rights on those entries.

Covington’s trade experts can help companies assess these considerations and assist in proceeding with litigation to secure legal right to refunds of IEEPA tariffs, should such refunds be made available in the future.

If you have any questions concerning the material discussed in this client alert, please contact the members of our Trade Policy practice.