Analysis: States Challenge New Section 122 Tariffs (Copy)
On March 4, 2026, the U.S. Court of International Trade issued one of the most consequential orders yet in the litigation over the Trump administration’s IEEPA tariffs.
Judge Richard Eaton ordered U.S. Customs and Border Protection (CBP) to liquidate affected entries without applying the IEEPA tariffs. The order potentially affects tens of millions of import entries and more than $166 billion in collected duties.
Since the order issued, several developments have clarified — but not fully resolved — how the government may respond to the ruling:
March 4: Judge Eaton issued the original order.
March 5: The court issued a slightly revised version of the order.
March 6: CBP filed a sworn declaration describing the agency’s systems and operational constraints.
Later on March 6: Judge Eaton “suspended” the March 4/5 order “to the extent that it directs immediate compliance,” in light of operational challenges detailed in the CBP declaration.
Together, these filings provide the clearest picture yet of how tariff refunds might actually occur — and the key uncertainties that remain.
1. The March 4 Order
As explained in a prior Grayhawk Law tariff litigation update, Judge Eaton’s order directs CBP to “liquidate all unliquidated entries that were entered subject to the IEEPA tariffs without applying those duties.”
The order applies nationwide, not just to the plaintiffs before the court. In practical terms, this would require CBP to liquidate affected entries as if the IEEPA tariff rate were zero percent.
That is an unusually sweeping form of relief in customs litigation. Normally, importers challenge duties through the protest process, followed by litigation if the protest is denied. The court’s order instead directs CBP to adjust liquidation outcomes across the board, potentially affecting a massive number of entries simultaneously. For reasons detailed in a prior litigation update, there is a significant chance that the government appeals and the Federal Circuit or Supreme Court reverses the order’s universal scope.
2. The March 5 Amended Order
On March 5, Judge Eaton issued a slightly revised version of the order.
The modification did not materially change the substance of the ruling. Instead, it clarified the precise scope of entries covered by the order and confirmed that CBP must liquidate affected entries without regard to the IEEPA duties.
In other words, the amended order reaffirmed the court’s central directive.
3. What CBP Revealed in Its March 6 Declaration
On March 6, CBP filed a detailed declaration describing how the agency’s systems currently process entries and why implementing the order immediately would be unrealistically burdensome.
The declaration contains several striking data points.
As of March 4, 2026:
Over 330,000 importers had paid IEEPA duties.
A total of 53,173,939 entries included IEEPA duties.
The government collected approximately $166 billion in those duties.
Approximately 20.1 million entries remain unliquidated.
CBP also explained that its current Automated Commercial Environment (ACE) system cannot simply remove IEEPA duties across all entries automatically.
Processing refunds using existing systems would require:
manual recalculation of duties on many entries
processing tens of millions of refunds individually
more than 4.4 million hours of work by CBP personnel.
To avoid that outcome, CBP says it is working to develop new ACE functionality that could streamline the refund process.
CBP aims to build this capability within approximately 45 days.
4. Liquidations Are Continuing in the Meantime
While CBP develops that system capability, entries are continuing to liquidate.
According to the declaration:
Over 700,000 entries were scheduled to liquidate on March 6.
Of those, approximately 339,000 included IEEPA duties.
Another 333,000 entries with IEEPA duties are scheduled to liquidate on March 13.
This implies that roughly 330,000 entries with IEEPA duties are liquidating each week.
If that pace continues, the implications are significant. Because CBP estimates it will need 45 days to implement the new ACE functionality, roughly six weeks of additional liquidations will occur in the meantime.
At the current pace, more than 2 million additional entries could liquidate during that period. Those entries could fall outside any system-wide adjustment and instead require importers to pursue refunds through protests or litigation, even if CBP thereafter processes unliquidated entries by subtracting IEEPA duties.
In total, that would mean that tens of millions of IEEPA entries would be liquidated before CBP’s new administrative process is established—and thus could fall outside the scope of that administrative process, seemingly requiring protests, litigation, or both.
5. CBP’s Proposed Refund System
The declaration also provides an important clue about how CBP may ultimately implement refunds.
Rather than automatically adjusting all entries, CBP describes a potential process in which:
Importers file a declaration in ACE identifying entries for which IEEPA duties were paid.
ACE recalculates the duties owed without the IEEPA tariffs.
CBP reviews the submission and verifies the calculations.
ACE liquidates or reliquidates the entries and issues refunds with interest.
Notably, this proposed system would require importers themselves to identify the entries and request refunds.
In other words, it appears to be an opt-in claims process, not an automatic adjustment of all affected entries.
The proposed ACE declaration process resembles the administrative refund system Customs implemented after the Supreme Court held the Harbor Maintenance Tax unconstitutional as applied to exports in United States v. U.S. Shoe Corp. Importantly, the HMT refund system bypassed the liquidation and protest framework because the HMT was not was not assessed through the import entry liquidation process. As a result, it remains unclear whether CBP will adopt a similarly broad administrative process here.
6. What the Government Has — and Has Not — Said
During the court hearing that preceded the order, government lawyers suggested that importers would need to pursue individual litigation to obtain refunds. The government further stated that it intends to appeal the order insofar as it applies to importers who have not sued.
CBP’s declaration, in turn, does not state that CBP intends to apply its administrative mechanism to all importers automatically. Instead, the declaration describes a process in which importers themselves file declarations in ACE identifying entries for which refunds are sought.
Together, the filings leave open a critical question:
Who will actually be eligible to use the new system?
7. Three Possible Paths Forward
Based on the court’s order and the government’s filings, several plausible scenarios could unfold.
Scenario 1: Broad Implementation of the Court’s Order
CBP could build the new ACE functionality and apply it to all remaining unliquidated entries.
Under this approach, entries would be liquidated with IEEPA duties set to zero, effectively implementing the court’s order across the board.
This scenario would provide relief to a large number of importers, but it would also be difficult to reconcile with the government’s earlier statements suggesting that refunds must occur through litigation.
Scenario 2: Relief Only for Importers Who File CIT Actions
Another possibility is that CBP could use the new system capability only for importers who bring cases in the Court of International Trade under 28 U.S.C. § 1581(i).
In that scenario, the system would exist but would be used to implement refunds only for importers who file suit. Once the CIT orders CBP to reliquidate a specific importer’s entries, CBP would then ask the importer to submit a declaration to assist CBP in processing the court-ordered refund.
That approach would align more closely with the government’s statements during the hearing than the universal relief offered by Scenario 1.
Scenario 3: Relief Through the Protest Process
A third possibility is that the system could be used only after importers pursue the traditional protest process.
Under that framework:
importers file protests with CBP;
CBP denies the protests;
importers sue in the Court of International Trade under § 1581(a)
If the court then rules in favor of those importers, CBP could use the new system capability to implement the resulting judgments. Like Scenario 2, this approach would align more closely with the government’s statements during the hearing than the universal relief offered by Scenario 1.
Reading CBP’s declaration in light of the government’s statements during the hearing, Scenario 1 may be less likely than Scenarios 2 and 3. If that bears out, then importers will need to either protest, sue, or both for all their entries — not just those that are liquidated before CBP's new system is in place.
8. What Importers Should Be Thinking About Now
At this stage, one thing is clear:
The government has not committed to issuing automatic refunds to all importers.
Meanwhile, CBP is continuing to liquidate entries without subtracting IEEPA duties — and millions of additional entries may liquidate before CBP completes its new system capability.
Because liquidation determines the procedural path for obtaining refunds, the timing of each importer’s entries could significantly affect available options.
As a result, many companies that paid IEEPA tariffs are now evaluating protective protest and litigation strategies to ensure their refund rights are preserved. Because liquidation continues while these issues are resolved, the timing of each importer’s entries may significantly affect the available path to obtaining refunds.
The Bottom Line
Judge Eaton’s order raises the possibility of large-scale tariff refunds, but the legal validity of that order remains highly uncertain, as does the mechanism for issuing those refunds.
CBP’s declaration suggests the agency is developing a new system for processing refunds, but it does not clarify who will ultimately be able to use that system — or under what circumstances. Government lawyers, in turn, indicated their view that only importers who sue will be eligible for refunds.
The next several weeks will likely determine whether tariff refunds occur directly through CBP’s proposed administrative process — or only through protests and litigation.
