An Update On IEEPA Duty Refunds

An order issued last Wednesday, July 15 by Judge Richard K. Eaton of the U.S. Court of International Trade (the CIT) may be good news for certain importers that have been awaiting the refund of International Emergency Economic Powers Act duties (IEEPA duties) following the Supreme Court’s February 20 decision in Learning Resources, Inc. v. Trump, which held that IEEPA does not authorize those duties. Judge Eaton ordered Customs and Border Protection (CBP) to “reliquidate” certain “entries” without regard to IEEPA duties, which should result in refunds to the importers of record that paid those duties. But the order applies only to the approximately 3,700 importers that filed complaints at the CIT. It does not apply to the many other importers that may be similarly situated but did not file their own complaints. In light of this development, such importers should consider whether to file their own complaints.

To understand the significance of Judge Eaton’s order, it is important to understand a few basic customs concepts at a high level of generality. Each importation of goods into the United States is considered an “entry,” which an importer or customs broker formally declares to CBP in a form known as an “entry summary.” An importer pays estimated duties on an entry at the time of importation. Subsequently, CBP definitively determines the duties owed in a step known as “liquidation,” which ordinarily must occur within 314 days of entry. Depending on the difference between estimated duties paid at entry and final duties determined at liquidation, CBP issues either a bill or a refund to the importer.

Within 90 days of liquidation, CBP may reliquidate an entry on its own initiative to correct any errors it may have made. After 90 days, the liquidation is considered final, and CBP ordinarily may reliquidate only if an importer has protested (which it must do within 180 days of liquidation) and CBP has granted the protest.

At issue in Judge Eaton’s July 15 order were IEEPA duties associated with entries in final liquidation status or within 10 days of reaching that status. (The order does not deal with unliquidated entries or entries within 80 days of liquidation. CBP has been processing refund applications associated with such entries under its authorities through its Consolidated Administration and Processing of Entries (CAPE) program.) The government contends that CBP cannot grant a protest of the assessment of such duties (because CBP lacked discretion in imposing the duties in the first place) and cannot reliquidate the relevant entries on its own authority if more than 80 days have elapsed since liquidation. CBP can reliquidate such entries, according to the government, only if the CIT orders it to do so. However, the government argues that the CIT can issue such an order only with respect to an importer that is actually before the court pursuant to a properly filed complaint; it cannot issue a nationwide order of the kind Judge Eaton issued in March (and subsequently amended) that purports to enjoin CBP to liquidate or reliquidate, without regard to IEEPA duties, the entries of all importers regardless of whether they are before the court.

The question of the CIT’s authority to issue a nationwide injunction is now before the Court of Appeals for the Federal Circuit. Separately, as a fallback in the event the government prevails in its appeal, plaintiffs in a case called Freestyle World, Inc. v. United States have moved the CIT to certify a class of importers that paid IEEPA duties (the theory being that a class action is an exception to the general rule against nationwide injunctions).

If the CIT’s nationwide injunction is affirmed, or if a class is certified in Freestyle World, importers that paid IEEPA duties under entries that are at or near final liquidation status eventually may receive a remedy like the one in Judge Eaton’s July 15 order. For some importers it may make sense to wait and see how the pending litigation plays out. Others, however, may be encouraged by the July 15 order and opt to file their own complaints.

The right strategy will depend on the individual importer’s circumstances. For an importer that paid a relatively small amount of IEEPA duties, a wait-and-see strategy may make sense, since the costs associated with filing its own CIT complaint may exceed the amount of any anticipated refund. Conversely, an importer that paid a relatively high amount of IEEPA duties may take its cues from Judge Eaton’s order and file a complaint now in the expectation that Judge Eaton will extend the scope of the July 15 order to newly filed complaints until the issue of nationwide or class-wide relief is definitively resolved. An importer may be especially inclined to take the latter course of action if the applicable limitations period is about to expire. (A case brought to the CIT under its “residual jurisdiction” ordinarily must be commenced no later than two years from the date of the contested action.)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.