Advisory Note: Recent Ruling Deems Certain Tariffs Unlawful
A federal appeals court ruled on Friday that President Trump’s attempt to bypass Congress and impose sweeping tariffs on foreign products was unlawful. The Trump administration had argued that import duties are necessary to strengthen the U.S. economy, but the U.S. Court of Appeals for the Federal Circuit ruled 7-4 that the Trump administration went too far when he declared national emergencies to justify tariffs on other countries writing that “it seems unlikely that Congress intended to… grant the President unlimited authority to impose tariffs.” The ruling did not take effect immediately and provided the administration time to appeal to the U.S. Supreme Court.
Small businesses and Democratic states brought the case challenging the tariffs and argued that the President has exceeded his authority in issuing the import duties. The appeals court’s decision is focused on the tariffs President Trump imposed in April on most trading partners, along with earlier levies on China, Mexico, and Canada. On April 2 — or Liberation Day as it was called — the administration imposed so-called reciprocal tariffs of up to 50% on countries with which the U.S. runs a trade deficit and 10% baseline tariffs on almost everybody else. Many of the tariffs have been on and off again as the administration suspended tariffs from time to time.
The administration justified the taxes under the 1977 International Emergency Economic Powers Act, or IEEPA, by declaring longstanding U.S. trade deficits “a national emergency.” In February, the administration invoked the law to impose tariffs on Canada, Mexico and China, saying that illegal immigration and drug trafficking amounted to a national emergency and that the three countries needed to do more to stop it.
The U.S. Constitution gives Congress the power to set taxes, including tariffs. But lawmakers have gradually let presidents assume more power over tariffs — and President Trump has made the most of it.
The court’s ruling does not encompass the levies on foreign steel, aluminum and autos that the administration imposed under a different regulation after Commerce Department investigations concluded that those imports were threats to U.S. national security. Nor does it include tariffs that President Trump imposed on China in his first term — and President Biden kept — after a government investigation concluded that the Chinese used unfair practices to give their own technology firms an edge over rivals from the U.S. and other Western countries.
On to the Supreme Court.
The President vowed to take the fight to the Supreme Court. The dissenting judges foreshadowed a possible argument for the administration that the 1977 law allowing for emergency actions “is not an unconstitutional delegation of legislative authority under the Supreme Court’s decisions” that have allowed the legislature to grant some tariffing authorities to the President.
If President Trump’s tariffs are struck down, it might have to refund some of the import taxes that it has collected. Tariffs are paid by U.S. importers, such as American manufacturers or retailers that rely on foreign-made products. While the U.S. companies typically swallow some of the cost, they pass on much of the added expenses to consumers in the form of higher prices.
Future Tariffs By Different Authority?
For instance, in its decision in May, the trade court noted that President Trump retains more limited power to impose tariffs to address trade deficits under another statute, the Trade Act of 1974. But that law restricts tariffs to 15% and to just 150 days on countries with which the U.S. runs big trade deficits.
The administration could also invoke levies under a different legal authority — Section 232 of the Trade Expansion Act of 1962 — as it did with tariffs on foreign steel, aluminum and automobiles. But that requires a Commerce Department investigation and cannot be imposed at the President’s sole discretion.
What About the Tariffs That Businesses Already Paid?
If the ruling that the tariffs were unlawful stands, payors or duties will have 180 days to file a claim for duties previously paid. Courts have consistently recognized the right to recover unlawfully collected tariffs, provided claimants adhere to procedural requirements. Administrative remedies must be pursued before initiating litigation, a principle applicable to customs refunds under 19 U.S.C. § 1514 and 19 U.S.C. § 1520.
When a tariff is declared unlawful, importers must pursue administrative remedies through U.S. Customs and Border Protection (CBP) before seeking judicial relief. These remedies are governed by the Tariff Act of 1930:
- 19 U.S.C. § 1514: Allows importers to file a protest against a CBP decision within 180 days of liquidation. This is the primary statutory mechanism to contest the imposition of duties.
- 19 U.S.C. § 1520(a)(4): Permits refunds based on clerical error, mistake of fact, or other inadvertence, but not errors of law. This provision may apply in certain procedural missteps related to entry documentation.
The specific process depends on the liquidation status of the entry, which is the final assessment of the amount due made after payment of the estimated duties. Before liquidation, importers may file Post-Summary Corrections (PSCs) to amend the entry and recover overpaid duties. After liquidation, importers must file a formal protest under 19 U.S.C. § 1514. While protests are generally submitted using CBP Form 19, any signed document that contests a CBP decision may qualify.
If CBP fails to act or denies relief, judicial review is available through the Court of International Trade. Importers should promptly assess the liquidation status of their entries and initiate the appropriate refund mechanism to preserve their rights.
