Federal Judge Evaluates Tariff Refund Process and Government Appeals

A federal judge in New York scrutinized a U.S. Customs and Border Protection (CBP) official about the government’s process for refunding billions of dollars in tariffs. These tariffs were collected before the Supreme Court determined President Donald Trump had illegally imposed higher duties on imports from most other countries. Judge Richard Eaton of the Court of International Trade expressed a need for details that would guide his decision on whether to order the government to expedite and broaden its tariff refund system.

Judge Eaton praised the online system developed by CBP for processing refund claims, acknowledging its efficiency. He noted that the government appeared eager to return all improperly collected import taxes. However, he expressed concern over a Justice Department appeal that could disrupt the process. The appeal challenges his order for the agency to refund all companies that paid tariffs, not just those that filed lawsuits. Judge Eaton remarked, “Sometimes lawyers push legal positions beyond what is useful for the client.”

The Justice Department contends that refund eligibility should be limited to companies involved in over 4,000 lawsuits contesting the legality of Trump’s tariff increases. This question is now before the U.S. Court of Appeals for the Federal Circuit.

In March, Judge Eaton instructed CBP to establish a system enabling all importers of record to apply for their part of the $166 billion collected before the global tariffs were struck down by the Supreme Court. Although Judge Eaton allowed CBP to introduce this system in phases to accommodate various refund claims, the online system was launched on April 20, initially addressing applications from importers with unresolved tax bills.

Eaton convened a hearing on Tuesday to decide whether he should mandate an immediate government refund of all owed money or grant CBP more time. The process’s pace and scope became contentious when Eaton required CBP Commissioner Rodney Scott to testify in court about the agency’s timeline for complying with the judge’s universal order. The Justice Department opposed, suggesting Scott’s deputy could attend instead. When Eaton insisted on Scott’s presence, the Justice Department appealed both this mandate and the judge’s broader ruling on refund eligibility. The Federal Circuit temporarily stayed the testimonial requirement, allowing Susan Thomas, CBP’s Executive Assistant Commissioner for Trade, to appear instead.

The hearing evaluated CBP’s readiness and commitment to extend the refund process to businesses with the earliest tariff payments. As of Tuesday, refund claims amounting to $90 billion were under processing, and the Treasury Department was directed to issue $23 billion in refunds. Thomas indicated CBP is developing a solution for handling older refund cases, expected to conclude by July’s end. But she noted no expansion beyond the initial 80-day window would occur while Eaton’s refund order is on appeal.

Government attorneys argued against the necessity of Eaton enforcing his order to speed up the process, asserting it involves only 6.9% of the $166 billion collected. They maintained most imports eligible for refunds are either processable by the existing system or part of ongoing lawsuits. Lawyers for the plaintiff companies, involved in the lawsuit prompting Eaton’s order, argued that a significant $11 billion remains unrefunded. They argued it would be unconstitutional for their clients to pay less in tariffs than other companies liable under the invalidated duties. A plaintiff lawyer proposed certifying the case as a class action for potentially tens of thousands of similar importers. Nonetheless, Eaton deferred this question, choosing not to issue rulings during the session.

He concluded by expressing a preference for allowing CBP to continue its progress toward fulfilling his comprehensive refund order. “Let the Customs and Border Patrol be the Customs and Border Patrol,” Eaton stated, emphasizing trust in the agency’s intention to achieve the government’s goals.