The U.S. Supreme Court has ruled that tariffs imposed under an economic emergency law by President Donald Trump were illegal, creating significant uncertainty around the refund of an estimated $175 billion. The court did not specify a method for distributing these refunds.
Tariffs are typically collected after importers post a bond and pay estimated duties upon goods' entry into the U.S. A final determination, known as liquidation, usually occurs months later, with excess payments subject to refund. Importers had sought to halt the final payment process while the Supreme Court considered the case, but their request was denied.
Justice Brett Kavanaugh noted in a dissent that the ruling is likely to generate "a mess" regarding refunds. The case now returns to the U.S. Court of International Trade to manage the complex refund process. Over a thousand lawsuits seeking refunds have already been filed, with many more expected.
Trade experts suggest individual importers may need to file lawsuits to claim refunds, as class-action status is uncertain. Importers have a two-year window under U.S. trade law to sue for recovery. This process could disproportionately impact smaller businesses, which may forgo refunds due to the high cost of legal fees.
While the Court of International Trade has overseen large-scale refunds in the past, such as after a harbor maintenance tax was deemed unconstitutional, the current situation presents unique challenges. Recordkeeping improvements may aid in determining refund amounts, but concerns remain about potential scrutiny of entry paperwork slowing the process.
Ultimately, the recipient of a refund may depend on contractual agreements between the entity that paid the tariff and the importer of record, potentially leading to further legal disputes. Trade groups warn this process could take years.