As the Process to Refund IEEPA Tariffs Takes Shape, the White House Invokes Other Laws to Impose Tariffs

The Trump Administration continues to signal a firm intent to pursue a trade policy reliant on tariffs. The Supreme Court’s ruling invalidating tariffs imposed by the Trump Administration pursuant to the International Emergency Economic Powers Act (“IEEPA”) (see our alert Supreme Court Invalidates IEEPA Tariffs, But Uncertain Legal Landscape Remains) has kicked off a refund process (see our alert Court of International Trade Endorses Customs’ Proposed Process for Tariff Refunds) that is still taking shape before the Court of International Trade (“CIT”). This process is intended to allow importers who paid IEEPA duties to receive full refunds, with interest, without pursuing litigation—although the contours of this refund program, whether it will cover all IEEPA duties, and the prospect of additional litigation, remain uncertain.

At the same time, the Trump Administration is looking to other statutory trade authorities to impose tariffs, including through investigations of supposedly unfair trade practices. These developments suggest that the Trump Administration continues to believe that tariffs are a key strategy to advance its economic and national security goals.

Refund Process for IEEPA Tariffs

U.S. Customs and Border Protection (“Customs”) is developing a process that will enable importers to obtain refunds for IEEPA duties. The process that Customs has proposed to the CIT involves importers submitting a declaration through Customs’s Automated Commercial Environment (“ACE”) that identifies a list of entries for which the importer paid IEEPA duties, which would then facilitate refunds on those entries using a new technical functionality that Customs is developing within ACE, referred to as the Consolidated Administration and Processing of Entries (“CAPE”). Customs has been updating the CIT periodically on its progress, and expects to begin testing some of the program’s constituent components shortly. On March 20, the CIT ordered a further update from Customs by March 31 “describing the progress Customs has made toward the completion of a process to issue refunds of IEEPA duties paid with interest.” While this process is still evolving, the current focus of the court appears to be on unliquidated entries and entries for which liquidation has not become final (namely, 180 days after liquidation), and the refund mechanism’s application to older entries falling outside those categories remains uncertain.

Balance of Payments Tariffs

Hours after the Supreme Court’s ruling on IEEPA tariffs, the Trump Administration implemented new tariffs using a different tariff law. President Trump imposed 10% across-the-board tariffs under Section 122 of the Trade Act of 1974 (codified at 19 U.S.C. § 2132), which gives the president the power to impose temporary quotas or import duties of up to 15% for up to 150 days to address “large and serious balance-of-payments deficits.” This is the first time any President has invoked Section 122. Some economists are skeptical that the provision, which was designed to address currency crises in a fixed-rate currency exchange system, could logically apply after the movement away from the gold standard and the Bretton Woods system. Notably, the balance of payments is a broader concept than balance of trade. The President later said in a social media post that he was increasing those tariffs to 15%, although that increased tariff rate has not been formally implemented. The Proclamation exempts many goods from several countries, including Canada and Mexico, and includes nearly 80 pages of product-specific exemptions.

Shortly after these tariffs were announced, two sets of plaintiffs—private companies and states led by Oregon—brought suit in the CIT seeking to enjoin the balance-of-payments tariffs as exceeding the scope of the President’s authority. Both parties have sought preliminary injunctive relief, and the government has not yet responded. Whether these tariffs will hold up against judicial challenges thus remains to be seen.

New Section 301 Investigations

The Trump Administration has also launched two different investigations under Section 301 of the Trade Act of 1974 (codified at 19 U.S.C. § 2411) which could result in the imposition of tariffs on a significant segment of U.S. trading partners, including key allies (such as South Korea, EU member states, the UK, and Japan), free trade agreement partners Canada and Mexico, as well as sensitive trading partners such as China.

The first investigation focuses on the consequences of Structural Excess Capacity and Production in Manufacturing Sectors in 60 different economies. The initiation notice states that these conditions have led to a concerning increase in exports to the United States.

The second investigation focuses on the apparent failure of several trading partners to Impose and Enforce Prohibitions on the Importation of Goods made with Forced Labor, decrying the exploitative and competition distorting effects of such practices. This investigation covers the same 60 countries as the parallel Section 301 investigation on manufacturing over-capacity.

Unlike the IEEPA and Balance of Payments Tariffs, imposition of Section 301 tariffs first requires the U.S. Trade Representative to conduct an investigation, which includes soliciting comments from stakeholders and a hearing. Given the number of potentially impacted imports, participation is likely to be significant. Written comments as to both Section 301 investigations are due by April 15.

Implications

The outcome of the IEEPA tariff case at the Supreme Court notwithstanding, the Trump Administration continues to apply available tariff authorities as part of its economic and national security strategies. Such authorities may be more limited in scope than IEEPA or require more administrative process, but will continue to impose cost and supply chain uncertainties for importers.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Greta L. Nightingale, an O’Melveny partner licensed to practice law in the District of Columbia; David J. Ribner, an O’Melveny partner licensed to practice law in the District of Columbia and New York; and Alexander N. Ely, an O’Melveny counsel licensed to practice law in the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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