Less than two months after the Trump administration rolled out its electronic tariff refund platform, it is now threatening to bring the operation to a standstill.
The administration said on Friday it plans to appeal a federal judge’s order that allowed all U.S. importers the ability to seek tariff refunds, not just those who sued the administration. The Supreme Court struck down tariffs President Donald Trump imposed under the International Emergency Economic Powers Act (IEEPA) in February, ruling the imposition of the tariffs exceeded the president’s powers.
U.S. Customs and Border Protection (CBP) rolled out the refund process, also known as the Consolidated Administration and Processing of Entries (CAPE), in April, creating an online portal through which importers could apply for their slice of the $166 billion in available refunds. According to a CBP court filing from May 26, CAPE has accepted for processing $85 billion in potential and certified refunds, including $20.6 billion sent to the U.S. Treasury Department for disbursement as of May 22. CBP did not disclose in the filing how many entities would receive those disbursements.
The Department of Justice argued in a court filing that Judge Richard K. Eaton exceeded his authority in ordering universal refunds, and that the government cannot issue refunds for importers that have already completed the “liquidation” process, or when CBP finalized the amount of money owed to an entity—unless that applicant sued to recover money it paid in illegal tariffs.
“CBP has no authority to reliquidate or refund money without a court order,” the Justice Department said in the filing.
The Justice Department also objected to Eaton’s demand that CBP Commissioner Rodney Scott appear in the U.S. Court of International Trade to testify on how long it would take for the U.S. to repay all 330,000 U.S. importers potentially eligible for tariff refunds. Eaton denied the Justice Department’s request, writing that Scott’s answers would help determine whether the Trump administration planned to fully refund all of the revenue it collected from the IEEPA tariffs.
Trump has repeatedly signalled he would push back against the Supreme Court’s tariff ruling, saying shortly after the decision it would take years to litigate the refunds. The White House has since imposed a raft of new levies under Section 301 of the 1974 Trade Act, used to retaliate against countries the U.S. deemed to have participated in unfair or discriminatory commerce practices, as well as Section 122, who outlines temporary import restrictions. The U.S. Court of International Trade ruled last month that Section 122 tariffs were illegal, and the United States Trade Representative is currently investigating tariffs under Section 301.
The White House did not immediately respond to Fortune’s request for comment.
Why appeal the universal refund order?
Tariffs experts expected the Trump administration to go after the universal tariff refund order, and previously said they were shocked the Justice Department had not appealed the order sooner, given the import taxes have been a cornerstone of the administration’s trade policy.
“It’s genuinely surprising that the government hasn’t appealed the universal refund order already,” Matthew Seligman, a federal litigator of constitutional law and principal of Grayhawk Law, told Fortune in April. “The government has opposed universal injunctions in every single context since President Trump retook office. If the government appealed the universal refund order, it would win.”
The Justice Department’s intention to appeal would mirror the Trump administration’s litigious track record with universal orders. Last June, the administration argued against nationwide inductions blocking Trump’s executive order to limit birthright citizenship, and the Supreme Court indeed narrowed injunctions, requiring future court orders around birthright citizenship to apply only to the plaintiff of that particular lawsuit.
This isn’t just a hallmark of Trump’s White House, but a pattern of legal behavior usually taken by U.S. governing powers, who typically work against any restrictions that could be placed upon their powers, according to Seligman.
“The executive branch always seeks to retain as much freedom of action and flexibility as it can, and so acquiescing to universal injunction is just extraordinarily difficult to imagine end up being the case,” he said.
However, an appeal of the universal refund order could also bring with it legal chaos. Eaton, the Court of International Trade judge, has previously signalled he would always rule the same way in tariff refund cases, such that if his universal order was overturned, the court would approve tariff refund eligibility for each individual importer, Lynlee Brown, EY partner of global trade, told Fortune in April. It would effectively create an arduous process out of one that has otherwise already been streamlined by CBP’s CAPE rollout.
Brown told Fortune the decision to potentially jeopardize the future of tariff refunds could also alienate businesses ahead of midterm elections, as Trump’s levy policy remains unpopular.
“A lot of it is politics, right?” Brown said. “It’s a midterm election year. This would not be the favorable thing to do, to say, ‘Hey, we’re not going to give you your money back.’”
