Tariff Tactics

Our previous post summarized predictions as to whether and how the Supreme Court may invalidate International Emergency Economic Powers Act (“IEEPA”) tariffs in its forthcoming decision in Trump v. V.O.S. Selections, Inc.  Speculation continues as to when the Court will issue its decision.  Many observers believed a decision was forthcoming when we last posted on IEEPA refund topics.  Others thought that one would issue January 14, which did not occur.  This post provides an overview of practical steps importers can take to prepare before a decision issues.  Importers should:

• Prepare documentation of IEEPA tariffs paid and of entry liquidation status;
• Request that CPB extend liquidation deadlines or file administrative protests;
• Review contracts to determine the impact of IEEPA refunds; and
• Prepare for potential replacement tariffs.

I. Introduction: Prospective vs Retroactive Relief: Refund Pathways

If the Supreme Court holds that IEEPA does not authorize tariffs, the Court could order relief only going forward, i.e. prospective relief.  Alternatively, it could order retroactive refund relief. 

A decision granting only prospective relief is possible, e.g., under the “sunbursting” doctrine.  Great Northern Railway Co. v. Sunburst Oil & Refining Co., 287 U.S. 358 (1932).  This possibility of “prospective overruling” was discussed during oral arguments in V.O.S. Selections, and importer counsel cited Office of the U.S. Trustee v. John Q. Hammons Fall 2006, LLC as a precedent supporting prospective relief.  Should the Court take this approach, then liquidation status of entries may become critical to refund availability.  Importers will need to assess whether prospective relief also covers entries for which the CIT orders reliquidation if the Supreme Court decision does not foreclose that possibility.

Alternatively, if the Supreme Court orders retractive relief (as we have predicted is more likely in our last post), importers will have pathways to refunds for both liquidated and unliquidated entries. 

In either scenario, the Supreme Court is likely to remand refund issues back to the lower courts.  See, e.g., United States v. U.S. Shoe Corp.  Importers can take action now to better preserve their rights in any further proceedings.

II. Practical Steps Importers Can Take

Here are four practical steps that importers can take to best preserve refund rights in advance of a Supreme Court decision.

1. Prepare Documentation of IEEPA Tariffs Paid

In advance of a Supreme Court decision, importers should gather documentation of IEEPA tariffs paid and entry liquidation status. 

IEEPA tariffs can be just one component of a duty levied on a product, because multiple tariffs can apply to a specific product.  In such cases, a Supreme Court decision invalidating IEEPA tariffs would only impact a portion of the tariff pad, and importers should prepare documentation to separate out IEEPA tariff amounts from total duties paid.

2. Exercise Administrative Remedies to Preserve Rights

For entries that have not yet liquidated, importers should consider filing requests with Customs and Border Protection (“CBP”) to extend the liquidation date.  For liquidated entries, importers have a right up to 180 days after liquidation to file a protest by submitting Customs and Border Protection (“CBP”) Form 19 through the CBP’s Automated Commercial Environment (“ACE”) electronic system.  We recommend importers file protests as a relatively low cost action that potentially preserves rights and later judicial remedies.

A protest should include, for each tariff entry:

• The number, date of entry, and date of liquidation;
• A description of the merchandise or product subject to the tariff; and
• Records of tariff payment and other related documentation submitted to CBP.

Importers who work with customs brokers may consider requesting records from their customs broker now or working with the customs broker to file administrative protests.  Protests are not exclusive of judicial remedies, and an importer can also sue under 28 U.S.C. § 1581(a) to challenge a protest denial or invoke the Court of International Trade’s residual jurisdiction under 28 U.S.C. § 1581(i) for judicial review. 

3. Assess Contractual Impacts

Only Importers of Record are eligible to receive CBP refunds, not exporters, consumers or other customers.  However, some importers may have entered into contractual obligations to pay exporters or other parties if the importer receives a tariff refund.  Importers should review these contracts to assess any downstream obligations as they also assess the impact and availability of refunds.  Importers should note that the Supreme Court and lower courts are highly unlikely to decide any of these downstream issues as part of the V.O.S. Solutions case, as these are governed by contracts, not IEEPA.

4. Assess Replacement Tariff Impacts

If the Supreme Court holds that IEEPA does not authorize tariffs, importers should expect that the Trump administration will move swiftly to enact replacement tariffs under different authority, including §§ 122 and 301 of the Trade Act of 1974, § 232 of the Trade Expansion Act of 1962, and § 338 of the Tariff Act of 1930.  Each of these is briefly summarized below.

Section 122 authorizes the President to levy an ad valorem tariff of up to 15% for a period of 150 days, to address a “large and serious United States balance-of-payments deficit[].”  The 15%- and 150-day limitations likely mean that the Administration will not solely rely on Section 122 to replace IEEPA tariffs, though it may use this provision to rase baseline tariffs from 10% to 15% on many countries’ exports.

Sections 232 and 301 require investigations before assessing a tariff.  Section 232 allows the President to impose tariffs on national security grounds after investigation.  These tariffs tend to be sector specific, for example tariffs on minerals and mineral derivative products needed for United States defense capabilities.  By contrast Section 301 tariffs authorize the United States Trade Representative (“USTR”) to issue tariffs after investigating violations of trade agreements or practices.  Section 301 tariffs imposed on various Chinese exports were a major pillar of President Trump’s trade policy during his first term.  Section 301 tariffs require USTR investigation, publication of notices for comment, and review of comment, before the agency reaches a final decision.  These processes typically take many months, and any determinations are subject to judicial review under the Administrative Procedure Act.

Section 338 tariffs are unprecedented, though they are theoretically within the President’s authority.  This section authorizes the President to impose an up to 50% tariff on countries to combat discriminatory trade practices.  Enactment of these tariffs could also contradict terms of other trade agreements, which may delay enactment.

Importers should be prepared to move quickly to secure refund rights in anticipation that tariffs may be reimposed through these alternative mechanisms in the months following a Supreme Court decision.

III. Conclusion

Regardless of how the Supreme Court decides the V.O.S. Selections case, importers should be prepared to move quickly and should anticipate new litigation and tariff imposition issues arising soon after the decision.

Tariff Tactics will continue to analyze the decision—once issued—with particular focus on its remedial implications and the downstream consequences for tariff refund strategies.