Trade Lawyers Split Over Early Filing of IEEPA Tariff Lawsuits

While the lawsuits are being filed amid questions over whether importers can currently file protests of the tariffs, and whether the courts will be able to reliquidate entries and issue refunds if they can't, questions remain over whether the normal route of extending liquidation, filing a protest and challenging its denial at the Court of International Trade may still be available and more cost-effective.

The cases at issue were filed in the wake of many of the Supreme Court justices expressing skepticism over the legality of IEEPA tariffs during oral argument last month (see 2511050001). Many of the cases were filed by attorneys at Crowell & Moring, who saw fit to file suit under Section 1581(i), the Court of International Trade's "residual" jurisdiction, rather than wait for a ruling from the high court then seek refunds administratively before CBP.

The theory that lawsuits need to be filed now rests on two assumptions, a trade attorney told us. The first assumption is that prior to the Supreme Court issuing its decision, the importers paying IEEPA tariffs don't have a currently valid protest right and so would be unable to validly protest their entries should they become liquidated. The second assumption is that the trade court doesn't have the power to order reliquidation should the IEEPA tariffs be struck down, since liquidation is final and neither of the two statutory exceptions to finality, a protest or an AD/CVD lawsuit, applies.

The attorney called the theory "untested" and "pretty novel," Others, such as Chris Duncan, partner at Squire Patton, think that there's no reason to file suit yet.

Duncan said the proper course of action would be to first ask for an extension of liquidation pending the result of the Supreme Court cases. However, as detailed in many of the complaints filed by Crowell, including one recently filed by Costco, CBP has been denying such extension requests. Another trade attorney told us that CBP adopted an informal policy of not extending liquidation.

Duncan speculated that CBP may be merely declining to extend liquidation currently on the basis that extension is "premature," given that the date of deemed liquidation is still too far out. He added that the agency may be trying to avoid having to rule on whether there's "good cause" for such an extension, which would go to the merits of the Supreme Court case and whether the president has the authority to impose tariffs under IEEPA.

CBP's authority to issue extensions is purely discretionary, and the agency rarely offers any reason for denying such requests, one attorney told us.

After an entry liquidates, though, importers have 180 days to file a protest. This is where Crowell's first theory takes shape, as many attorneys think the liquidations of tariffs "may be deemed 'ministerial' actions rather than Customs 'decisions,' and will not be protestable," said John Peterson, partner at Neville Peterson. Filing a protest may be deemed "futile," meaning the importer won't be able to properly file a protest with CBP and precluding Section 1581(a) review for denied protests at the trade court, Peterson said.

Attorneys at Morgan Lewis said there "may be an argument that CBP’s various guidance implementing the IEEPA tariffs is not purely ministerial, though it still seems unlikely that the Court would effectively cut off an importer’s ability to recover illegally imposed tariffs based on failure to file a protest."

Some attorneys are considering filing "protective protests," whereby a protest is filed that says a company intends to protest liquidation on the results of the Supreme Court case, said Venable attorney Liz Lowe during a Dec. 4 webinar. There's "no precedent for that," adding that "it's not something" she "would rely on as guaranteeing that" an importer's "going to be able to get a refund back."

One attorney noted that this identical issue arose in the Section 301 litigation. To sidestep the issue, the trade court agreed to enjoin the liquidation of the entries at issue, rather than let the entries liquidate and order reliquidation if the tariff authority at issue was found to be invalid. Judge Mark Barnett dissented from this decision, finding it plain that the trade court had the authority to order such reliquidation.

On the other side of this issue are a handful of U.S. Court of Appeals for the Federal Circuit decisions seemingly paring back CIT's authority to do just that. One such recent case, Target v. U.S., saw CAFC say CIT can't order the reliquidation of finally liquidated entries except where a protest or AD/CVD suit has been filed, and that the statute, 19 U.S.C. 1514, doesn't let CIT order reliquidation in an AD/CVD context based on principles of fairness (see 2504210029).

This ruling may be limited exclusively to AD/CVD cases, though, one attorney said. "Nothing about the dumping statute comes into play here, so there's an open question" on how the court's authority applies in the context of IEEPA tariffs, the attorney said. The attorney added that it "would seem outrageous to me for the courts to eventually conclude that they just don't have this authority and there's no protest. That just seems nuts."

Until the high court issues its decision, "the Court will accept" cases under its 1581(i) jurisdiction, though if and when the IEEPA tariffs are struck down, "the 1581(i) avenue will likely close," Peterson said.

Duncan added that if the tariffs are vacated, the first proper move will be to file a post-summary correction. If the government ends up fighting the prospect of paying refunds "tooth and nail," the next move would be to file a protest, and, in the case that's denied, then filing suit at CIT. In the meantime, filing a lawsuit now prematurely saddles importers with the cost of litigation and may lead counsel to "miss potentially filing protests on entries that" they "need to be tracking," Duncan said.

Lowe echoed this concern about the burden of liquidation, though she said some attorneys are rightly considering the costs of potentially missing out on relief by not filing a 1581(i) case now, especially if the Supreme Court takes longer to decide the issue. Peterson was more blunt in his assessment, saying that 1581(i) cases "idiot proof" any protest process.