Trump appeals US trade court order for broad IEEPA tariff refunds

The Trump administration has formally appealed a judge’s order compelling customs authorities to refund all importers who paid the $166 billion in global tariffs that the US Supreme Court declared unlawful earlier this year.

The Justice Department filed the appeal notice in the US trade court on Tuesday. Government lawyers previously signalled that they would escalate the refund fight, arguing that Judge Richard Eaton lacks the authority to order refunds for any importer who paid the levies but hasn’t filed a lawsuit.

Separately, the Justice Department on Tuesday also appealed an order from Eaton directing Customs and Border Protection Commissioner Rodney Scott to testify in person at an upcoming hearing about the status of the government’s efforts to pay refunds.

In a May 29 ruling, Eaton rejected the Justice Department’s position that the case didn’t meet the “extraordinary circumstances” required to force a high-level official to come to court.

Both disputes will next be heard at the US Court of Appeals for the Federal Circuit. Whoever loses could bring the tariff fight back to the Supreme Court, which had left the refund question unresolved when it ruled against the government in February.

In another Tuesday court filing, Justice Department lawyers asked the Federal Circuit to rule on the Scott testimony issue by Friday, to give officials enough time to decide whether they needed to ask the justices to intervene ahead of the June 9 hearing.

The customs agency has said that it’s in the process of repaying approximately $85 billion so far through an online claims portal that the agency created after the government lost at the Supreme Court.

The administration contends that it set up the system under its “own authorities” and that Eaton cannot order refunds for importers whose tariff payments became final unless they are active participants in court.

The Justice Department has pointed to a Supreme Court ruling last year in a different case that limited the power of federal judges to enter nationwide or so-called “universal” injunctions that cover individuals or other entities who aren’t parties in court.

Trade lawyers have expressed concerns for months that the Trump administration’s plan for refunds would place too much of the burden on importers to act, and that many small businesses wouldn’t have the financial resources or expertise to file claims in the new portal or to sue in court.

Eaton was placed in charge of several thousand refund lawsuits filed in the New York-based trade court over the past year. After the Supreme Court struck down President Donald Trump’s use of a 1977 emergency powers law to impose the levies, Eaton entered orders directing customs authorities to recalculate them for all imports and refund the difference.

The judge suspended his order to allow the customs agency time to develop the portal for refund claims. It had a relatively smooth launch in April, but the government told the court that it wasn’t able to process certain types of more complicated entries, including for tariff payments that had become final — an automatic process that happens on a rolling basis.

The customs agency didn’t provide a schedule for later phases of the refund process. In late May, Eaton issued an order scheduling a hearing for the parties to weigh in on whether he should lift the suspension on his order and move ahead with forcing the government to figure out how to make all importers whole.

In a court filing several days later, the Justice Department indicated that it planned to pursue an appeal of Eaton’s refund order as well as the directive to Scott to appear on June 9.

The bar is generally high for judges to require executive branch officials to testify. In the tariff case, government lawyers argued there were senior officials more knowledgeable than Scott about the details of the refund process and that they would be in a better position to discuss the “impractability” of immediately complying with the full scope of Eaton’s order to recalculate all of the tariffs paid under Trump’s policies and refund the difference.

Eaton swiftly rebuffed the Justice Department’s request to reconsider Scott’s testimony, writing that he needed to hear from a “policy maker and administrator” about whether the Trump administration intends to return all of the tariffs it collected and, if so, how it plans to do that.

The judge wrote that he was “fully aware” of “separation of powers concerns” in forcing an executive branch official to testify and that he had “taken these matters into account in denying the government’s motion.”

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In a 6-3 decision in February, the Supreme Court ruled that Trump’s use of the International Emergency Economic Powers Act was unlawful. But the justices didn’t address the question of refunds, sending that issue back to the lower courts to resolve.

In a dissenting opinion, Justice Brett Kavanaugh wrote that any refund process was “likely to be a ‘mess,’” referring back to statements made during arguments in the case.

It’s unclear how many of the approximately 330,000 importers who paid the contested tariffs would need to file lawsuits in the trade court under the Justice Department’s position in order to be eligible for refunds.

The case is V.O.S. Selections v. United States, 25-cv-66, US Court of International Trade (New York).