Trump administration takes steps to appeal decision allowing importers to seek refund of tariffs

Less than two months after the Trump administration rolled out its electronic fare reimbursement platform, it is now threatening to cripple the operation.

The administration announced plans Friday to appeal a federal judge’s order that allowed all U.S. importers to seek refunds of tariffs, not just those who sued the administration. The Supreme Court in February struck down tariffs imposed by President Donald Trump under the International Emergency Economic Powers Act (IEEPA), ruling that the imposition of the tariffs exceeded the president’s powers.

U.S. Customs and Border Protection (CBP) rolled out the Refund Process, also known as Consolidated Administration and Processing of Entries (CAPE), in April, creating an online portal through which importers can request their share of the $166 billion in refunds available. According to a CBP court filing on May 26, CAPE agreed to process $85 billion in potential and certified refunds, including $20.6 billion sent to the U.S. Treasury Department for disbursement beginning May 22. CBP did not disclose in the filing how many entities would receive these disbursements.

The Justice Department argued in a court filing that Judge Richard K. Eaton exceeded his authority in ordering universal refunds and that the government could not issue refunds to importers who had already completed the “liquidation” process, or where CBP had finalized the amount owed to an entity – unless the plaintiff sued to recover the money it had paid through illegal tariffs.

“CBP has no authority to reliquidate or refund money without a court order,” the Justice Department said in the filing.

The Justice Department also opposed Eaton’s request that CBP Commissioner Rodney Scott appear before the U.S. Court of International Trade to testify about how long it would take the United States to reimburse the 330,000 U.S. importers potentially eligible for tariff refunds. Eaton denied the Justice Department’s request, writing that Scott’s answers would help determine whether the Trump administration plans to fully refund all revenue collected through IEEPA tariffs.

Trump has repeatedly signaled that he would oppose the Supreme Court’s ruling on the tariffs, saying that soon after the ruling it would take years to challenge the refunds. The White House has since imposed a series of new levies under Section 301 of the Trade Act of 1974, used to retaliate against countries the United States deemed to have participated in unfair or discriminatory trade practices, as well as Section 122, which sets temporary import restrictions. The U.S. Court of International Trade ruled last month that the Section 122 tariffs were illegal, and the U.S. Trade Representative is currently investigating the Section 301 tariffs.

The White House did not immediately respond to Fortune’s request for comment.

Why appeal the universal reimbursement order?

Tariff experts expected the Trump administration to attack the universal tariff refund order, and previously said they were shocked the Justice Department did not appeal the order sooner, given that import taxes are a cornerstone of the administration’s trade policy.

“It’s really surprising that the government hasn’t already appealed the universal reimbursement order,” Matthew Seligman, a federal constitutional litigator and principal at Grayhawk Law, told Fortune in April. “The government has opposed universal injunctions in every context since President Trump took office. If the government appealed the universal reimbursement order, it would win.”

The Justice Department’s intention to appeal would reflect the Trump administration’s contentious record on universal orders. Last June, the administration opposed nationwide inaugurations blocking Trump’s executive order to limit birthright citizenship, and the Supreme Court effectively restricted the injunctions, requiring that future court orders regarding birthright citizenship apply only to the plaintiff in that particular lawsuit.

This is not just a feature of the Trump White House, but a pattern of legal behavior generally adopted by America’s governing powers, who generally oppose any restrictions that might be placed on their powers, according to Seligman.

“The executive branch always seeks to retain as much freedom of action and flexibility as possible, and so it’s extraordinarily difficult to imagine that that ends up being the case,” he said.

However, an appeal against the universal reimbursement order could also lead to legal chaos. Eaton, the Court of International Trade judge, has previously indicated that he would always rule the same way in duty refund cases, so that if his universal order were overturned, the court would approve duty refund eligibility for each individual importer, Lynlee Brown, EY global trade partner, told Fortune in April. This would effectively create an arduous process, which would have already been streamlined by the deployment of CBP’s CAPE.

Brown told Fortune that the move to potentially jeopardize the future of tariff refunds could also alienate businesses as the midterm elections approach, as Trump’s levy policy remains unpopular.

“A lot of it is about politics, isn’t it? » said Brown. “It’s a midterm election year. It wouldn’t be a good thing to say, ‘Hey, we’re not going to give your money back.'”

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