The administration of US President Donald Trump has suffered another legal setback after a federal judge ruled that companies which paid tariffs later struck down by the US Supreme Court must receive refunds.
Judge Richard Eaton of the US Court of International Trade in New York ruled on Wednesday (local time) that “all importers of record” are entitled to benefit from last month’s Supreme Court decision that invalidated the tariffs imposed under the 1977 International Emergency Economic Powers Act (IEEPA).
In February, the US Supreme Court ruled the tariffs unconstitutional, including the sweeping “reciprocal” duties that had been imposed on imports from nearly every country. The majority of the court held that the president does not have the authority to independently impose or alter tariffs, emphasising that taxation powers rest with Congress.
Eaton’s order also clarified how refund disputes would be handled. The judge said he alone would hear cases related to the reimbursement of the IEEPA duties. The Supreme Court’s earlier ruling had not addressed the process for issuing refunds, leaving uncertainty that the latest trade court decision now seeks to resolve.
Trade lawyer Ryan Majerus, a partner at King & Spalding and a former US trade official, told the Associated Press that the administration is likely to challenge the decision or seek a temporary stay to allow more time for US Customs to implement the ruling.
According to data from the Penn Wharton Budget Model, the federal government had collected more than $130 billion in the now-invalid tariffs by mid-December and could ultimately face refund liabilities of up to $175 billion.
The order stems from a case filed by Atmus Filtration, a filtration products manufacturer based in Nashville, Tennessee. The company argued that it was entitled to recover duties it had paid under the now-struck-down tariff regime.
Under procedures followed by US Customs and Border Protection, imported goods undergo a process known as “liquidation”, during which the agency determines the final duties owed. Importers have 180 days to challenge those calculations, after which the assessment becomes legally final.
Judge Eaton directed customs authorities to stop collecting IEEPA tariffs on shipments that are still within the liquidation process. For imports that have already passed that stage, the agency must recalculate duties without including the invalid tariffs.
Barry Appleton, a law professor and co-director of New York Law School’s Center for International Law, said the ruling would benefit businesses and consumers who bore the cost of the tariffs.
“This is a great decision for importers and consumers who paid,” Appleton said. “It will make customs brokers busy, but it should simplify matters for the courts and help establish a process for importers who paid duties within the last 180 days.”
The ruling follows another setback for the administration earlier in the week, when a separate federal court rejected its request to slow down the refund process. The US Court of Appeals for the Federal Circuit subsequently directed the New York trade court to determine how the reimbursements should be handled.
Attention now shifts to US Customs and Border Protection, which will need to create a system capable of managing potentially billions of dollars in refunds.
While the agency regularly processes refunds in cases involving errors, trade lawyer Alexis Early, a partner at Bryan Cave Leighton Paisner, noted that the current system was not designed to handle such a large-scale payout.
“The devil will be in the details of the administrative process,” she said.
