Analysis: The State of Play in the Court of International Trade: A Holding Pattern that Won't Last
This past Saturday, April 4th marked one month since Judge Eaton issued his sweeping order to Customs and Border Protection to issue universal refunds to all importers who paid IEEPA tariffs—not just to those importers who have protested or sued.
The order has been effectively paused. Because CBP cannot implement refunds through its existing ACE system, Judge Eaton has “suspend[ed]” the order to the extent it requires immediate compliance while CBP builds a new processing system—Consolidated Administration of Processing of Entries (CAPE). CBP now expects CAPE to be completed within the next several weeks.
1. The Key Question Remains Unanswered—and is Often Misunderstood
It is tempting to assume that once CAPE is operational, CBP will simply issue refunds to all importers. That conclusion is at best premature—and likely wrong.
CAPE will be an administrative mechanism to issue refunds. The existence of that system does not decide—imply—who is legally entitled to use it.
In Grayhawk Law's prior client alert on March 7, we laid out three possible paths forward:
Scenario 1: Refunds for All Importers Via the March 4 Order
Scenario 2: Refunds Only for Importers Who File CIT Actions
Scenario 3: Refunds Only for Importers Who File Protests
All three scenarios remain open. The government has until May 4 to appeal the March 4 order, and as a practical matter it has not needed to appeal so far because Judge Eaton has suspended immediate compliance with the order.
2. The Government's Position Coming Into Focus
Although the public record is thin, what has emerged points in a consistent direction: the government will challenge, probably successfully, the March 4 order's universal scope.
A Department of Justice lawyer stated in a hearing that "it is not our position that every single entry and every importer will get a refund. Our position is that you have to file a claim in this court which is why over 2,000 companies have filed claims."
The government indicated that it plans to appeal the March 4 order.
On March 20, Judge Eaton issued an order suspending the March 4 order for another week. That order included the following statement: "Considering that no resolution was reached with respect to the reliquidation of entries for which liquidation has become final, importers should be aware of the remedies available under 19 U.S.C. § 1514 (Protest against decisions of Customs Service)." Judge Eaton's statement indicates that protesting—not just suing in the CIT—may be necessary for importers to receive refunds on some or all of their entries.
On March 26, in response to Judge Eaton's March 20 order, a group of companies who had already filed lawsuits in the CIT filed an emergency motion to stay liquidation of their entries. The companies were alarmed by Judge Eaton's indication that protests may be necessary, because a separate panel of CIT judges had previously indicated that the importers could sue directly in court without protesting. The next day, Judge Eaton denied the motion without elaborating.
Taken together, these signals point in a single direction:
The government is unlikely to accept universal refunds and will seek to limit relief to importers who preserved their claims—through protests, litigation, or both.
3. What Happens Next
The next phase will likely move quickly.
Once CAPE is complete, Judge Eaton will likely lift the suspension of his March 4 order. At that point, the government will face a choice:
Implement refunds broadly, or
Appeal the March 4 order's universal scope and seek a stay.
All indications are that it will appeal.
If the government appeals, it will almost certainly seek an emergency stay from the Federal Circuit. That request will likely be resolved within days, and it will be an early indicator of how the appellate courts view the merits.
As we noted in Grayhawk Law's prior client update on March 4, there is a substantial likelihood that the Federal Circuit—and ultimately the Supreme Court—will reject the universal scope of the March 4 order. It is less clear whether the imminent appeal of the March 4 order will resolve whether importers must protest and then sue in the CIT, or whether they may skip protesting and sue directly.
The bottom line: Importers should not assume that automatic refunds will be available.
As this process plays out, the 180-day deadline for protesting an entry continues to run. Until the courts make clear whether they will ultimately require protests prior to suing, we believe importers should protest within the 180-day window to preserve their refund rights regardless of what the courts ultimately decide.