US customs agency expects tariff refund system to be ready in 45 days

Summary

• US Customs will create a system within 45 days to refund illegal Trump-era tariffs, avoiding importer lawsuits.
• Importers must file declarations via CBP's ACE system for validation and receive a single Treasury payment with interest.
• CBP claims its existing system is inadequate for the scale of 53 million shipments and US$166 billion in tariffs.

WASHINGTON - The US customs agency is readying a system within 45 days to process refunds
on US President Donald Trump’s tariffs that were struck down as illegal
and importers will not have to sue for them, a customs official said in a court filing on March 6.

The declaration by Mr Brandon Lord, a top Customs and Border Protection (CBP) official, came as government lawyers were meeting with a federal trade judge to hammer out a process for returning US$166 billion (S$212 billion) in tariff payments to around 330,000 importers.

The tariffs that were a central part of President Donald Trump’s economic policy were struck down as unconstitutional by the Supreme Court in February.

However, the Supreme Court did not say how the collected tariffs should be refunded, worrying small importers that the process would be prohibitively expensive and time-consuming.

“This new process will require minimal submission from importers,” Mr Lord said in his declaration, which was filed with the US Court of International Trade just as government lawyers began meeting with Judge Richard Eaton of the US Court of International Trade.

Judge Eaton called the meeting to discuss how the government will carry out his sweeping order issued on March 4 directing the CBP to begin refunding tariffs to potentially hundreds of thousands of importers using the agency’s existing internal process.

Judge Eaton called the meeting to discuss how the government will carry out his sweeping order issued on March 4 directing the CBP to begin refunding tariffs to potentially hundreds of thousands of importers using the agency’s existing internal process.

On March 6, after concluding the meeting with the government lawyers, he said in a court filing he was amending that order to no longer require “immediate compliance”, and appeared to be giving CBP time to carry out the new system. Judge Eaton said he changed his order after considering the “declaration of Brandon Lord”.

Judge Eaton said in his order on March 4 that he had been appointed by the trade court to hear the roughly 2,000 lawsuits filed by importers
including FedEx and L’Oreal seeking refunds. Trade lawyers said those lawsuits were the tip of the iceberg, and thousands more were prepared to sue if the government failed to develop a system for automatic refunds.

Affiliates of Nintendo and CVS became the latest large companies to sue for refunds on March 6.

Single payment for importers

Mr Lord said the customs agency anticipated the refund process would require importers to file a declaration with the CBP’s computer system known as ACE detailing tariff payments, and the system and CBP would then validate those and process refunds with interest. The importers would not have to sue.

Each importer would receive a single payment from the Treasury Department, regardless of how many separate entries of goods the importer had made.

Mr Lord did not estimate how long it would take to process the refunds, but said the CBP would not be able to comply with Judge Eaton’s order from March 4. Judge Eaton contemplated a system in which refunds would be automatically returned to importers through the existing system without documentation or input from the importer.

“Its existing administrative procedures and technology are not well-suited to a task of this scale and will require manual work that will prevent personnel from fully carrying out the agency’s trade enforcement mission,” Mr Lord said, in explaining why the agency could not use its existing system.

He said more than 330,000 importers had paid an estimated US$166 billion in tariffs on more than 53 million shipments.

Judge Eaton’s order would have required the agency to manually review paperwork on every shipment, a process Mr Lord said would require more than four million hours of labour.

‘Practical proposal’

The US Chamber of Commerce, the largest US business lobbying group, applauded the CBP’s 45-day plan as “a constructive and practical proposal” to administer refunds efficiently.

“Most importantly, this proposal would spare the hundreds of thousands of small businesses who are owed refunds from having to litigate to obtain them,” the Chamber’s chief policy officer Neil Bradley said in a statement that also encouraged further refinements.

However, Mr Lord’s declaration also indicated that few importers had signed up for the CBP’s electronic system for refunds. Out of more than 330,000 importers who paid the illegal duties, only 21,423 signed up for the electronic refund system that went into place on Feb 6, according to Mr Lord.

Judge Eaton is overseeing a refund lawsuit by Atmus Filtration, which the judge is using as a vehicle to order CBP to issue the refunds for all importers. REUTERS