On 28 May, the U.S. Court of International Trade (CIT) issued a ruling blocking President Trump from imposing tariff actions under the International Economic Emergency Powers Act (IEEPA). The unanimous ruling from the CIT notes that IEEPA does not grant the president “unbound authority” to impose tariffs on almost every trading partner. The judges provided a 10-day period in which the government must implement the operational changes to halt the collection of tariffs.
Soon after the CIT issued its ruling, the Trump Administration filed an appeal and a request to pause enforcement of the ruling. If the Administration is provided a stay, it would be able to continue implementing tariffs while the appeal process proceeds.
What is Known
Ruling impacts IEEPA tariffs only. This includes:
- Broad reciprocal tariffs (currently 10%, and scheduled to increase to higher reciprocal tariffs for some countries on 9 July)
- Fentanyl/border crisis tariffs on Canada and Mexico (currently 25% on non-USMCA compliant goods)
- Fentanyl tariffs on China (currently 20%)
Section 232 and Section 301 tariffs are not in scope. The ruling does not affect:
- Tariffs issued by the Trump administration under separate legal authorities, including Section 232 tariffs imposed on steel, aluminum or autos/automotive parts, nor Section 301 tariffs in place since Trump’s first term.
- Sector specific Section 232 investigations currently underway targeting pharmaceuticals, semiconductors, copper and lumber.
Alternate legal authorities may be invoked to implement tariffs on imports.
- The Trump Administration may pursue other legal means to implement tariff action, including authority under Section 232 (to protect national security), Section 301 (to provide relief from unfair trading practices), and Section 122 of the Trade Act of 1974 (to respond to large and serious deficits and international payments problems).
- However, these alternate legal authorities encompass more extensive statutory requirements and/or Congressional approval before tariffs can be implemented or expanded.
- For instance, if President Trump were to leverage Section 232 or Section 301, the Administration would be required to carry out investigations, engage in a public consultation process, and take target a much narrower scope of products compared to the broader IEEPA reciprocal tariffs.
What is Unknown/Developing
Timeline
- A timeline for the appeals process is not yet available, but it is likely to proceed at a rapid pace given how quickly the Trump Administration filed for an appeal and the importance of IEEPA for the Trump Administrations economic policy. Some news reports suggest a decision on appeal could be made mid-to-late June.
- As part of the appeals process, the case will now proceed to the Court of Appeals of the Federal Circuit (CAFC), but it is not clear when the court it will issue a decision.
- Additionally, there is reporting that the Administration could request an emergency appeal to the Supreme Court to maintain tariffs during the appeal, but no timeline has been provided.
Refund of tariffs paid to date
- Neither the decision nor the order make a mention of possible refunds for duties already paid, but reporting indicates that the U.S. Government may be liable for refunding up to $14 B in paid tariffs by importers.
- Looking at recent actions, CBP announced in a May 15 CSMS that requests for refunds of non-stackable Section 232 tariffs with Canada/Mexico IEEPA tariffs could be made by filing a post summary correction for unliquidated entries or filing a protest under 19 U.S.C. 1514 for entries that have liquidated but where the protest period has not expired. It is not clear whether the same process would be required for any future refunds of IEEPA tariffs under this order. We anticipate CBP would publish a CSMS for guidance in the future.
Bilateral negotiations and retaliation
- Without IEEPA tariffs, the Trump Administration may lack leverage to continue engaging in negotiations with numerous trading partners in response to reciprocal tariffs.
- It is not yet known if trading partners currently in negotiations with the United States to avoid higher reciprocal tariffs will scale back their talks. Trading partners already in queue may seek to continue with the negotiation process to limit the risk of additional tariff action stemming from alternate legal authorities.
- Neither China nor Canada have indicated whether they would ease retaliatory actions currently in place against IEEPA tariffs.
- The EU, which is undertaking a public consultation on potential expanded scope of products targeted for retaliatory tariffs, has not commented on the ruling.
