Federal Appeals Court Rules IEEPA Tariffs Unlawful, But Is A Refund Doubtful? Protective Legal Action Could Preserve Your Rights

Major developments in international trade law may be creating a narrowing window of opportunity for U.S. importers seeking to preserve their potential rights to IEEPA tariff refunds. Many companies, including Costco Wholesale Corporation, have recently brought suit in the U.S. Court of International Trade, claiming that it may soon be too late to sue the Federal Government for a refund of IEEPA duties.

BACKGROUND

In a series of landmark decisions, both the Court of International Trade (“CIT”) and the U.S. Court of Appeals for the Federal Circuit have held that several tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) including the widely known “Fentanyl Tariffs” and “Reciprocal Tariffs” are unlawful. The issue is now before the U.S. Supreme Court, which has agreed to review the Federal Circuit’s decision.

While that Supreme Court review proceeds, the practical reality for importers is immediate. U.S. Customs and Border Protection (“CBP”) continues to liquidate entries. Liquidation, the final computation of customs duties, must occur within one year of importation. In the case of the first IEEPA tariffs, liquidation will occur within one year of their February 14, 2025 implementation date. Therein lies the problem for importers: while these entries near liquidation, there is still a serious debate as to whether courts can order a refund of tariffs on a liquidated entry.

In some cases, the Federal Government has argued that the CIT has no authority to refund tariffs paid once entries are liquidated. The CIT itself has said that there are doubts about its authority to order reliquidation or refunds in certain cases, and that liquidation poses the threat of “irreparable economic harm.” See In re Section 301 Cases, 3d 1355, 1365-66 (Ct. Int’l Trade 2021).

Since this question has yet to be answered by a higher court, many parties are wondering whether refunds for IEEPA tariffs would ultimately be available for liquidated entries. Based on this confusing case law, even if the Supreme Court agrees the tariffs are unlawful, the courts may have no way to issue a refund.

Stopping Liquidation From Moving Forward: A Model for Preserving Refund Rights

Under normal circumstances, importers would rely on standard administrative remedies (post-summary corrections, protests, or other routine mechanisms) to seek refunds if the Supreme Court ultimately upholds the lower courts’ decisions. Historically, when the government was found to have improperly collected fees (such as in the Harbor Maintenance Fee litigation), Customs issued special refund procedures.

With this consequential, unresolved legal question, there is no guarantee that similar procedures will be available here. The CIT has at least suggested that once entries liquidate without protective action, an importer’s refund rights may be irretrievably lost.

In an abundance of caution, many importers have filed suit seeking an order preventing CBP from liquidating affected entries while the legality of the IEEPA tariffs remains unresolved. That strategy—seeking judicial intervention to halt liquidation—ensures that importers’ refund rights remain intact regardless of how long the litigation continues.

This approach offers a prudent and cost-effective option for many importers whose entries are currently liquidating or will liquidate in the coming months.

Why Filing Suit Now May Benefit Importers

A lawsuit of this kind may offer several key advantages:

• Preservation of Refund Rights: A court-ordered suspension of liquidation keeps the assessed tariffs from finalizing.
  
• Protection Against Uncertainty: If the Supreme Court upholds the lower courts’ rulings, the availability and timing of any refund process remain uncertain. Litigation helps ensure importers are not dependent on future administrative action.
  
• Low Upfront Cost Relative to Exposure: For many companies paying substantial IEEPA-based duties, the potential recovery far outweighs the cost of initiating protective litigation.

Who Should Consider Taking Action?

Any importer who has paid IEEPA-based duties, such as the Fentanyl, Reciprocal, or other country-specific IEEPA tariffs, should evaluate whether entries have already liquidated or will liquidate soon. Companies with significant exposure should especially consider whether a protective suit is warranted. Even if some entries have been liquidated, it is still possible to protest those liquidations and include them in the lawsuit.

As an additional note, these issues are entirely separate from the pending suits involving Section 301 duties from the first Trump administration. Filing a protective action here does not affect or overlap with those proceedings.

Our Firm Can Help You Assess Your Options

Our International Trade and Customs team is closely following the appellate and Supreme Court proceedings and is already advising clients on whether Costco-style protective litigation is appropriate for their import profiles.

If your company has paid IEEPA-based tariffs, we recommend contacting us as soon as possible to evaluate whether filing suit could preserve your refund rights before they expire.

To discuss whether a protective action is right for you, please reach out to our office immediately.