Bonds, Surprise Liquidations Factors to Consider in Preserving IEEPA Tariff Refunds
As importers mull their options on how to prepare for potential tariff refunds should the Supreme Court rule against the legality of IEEPA tariffs, importers should also be mindful of the potential pitfalls they might encounter as they preserve their rights to refunds from CBP, according to speakers during Flexport's Sept. 17 webinar on tariffs and updates on trade.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Importers need to monitor entry liquidation dates "very closely" because of the potential for CBP to proactively issue refunds for the difference in duties that were paid when new trade agreements rolled out, said Rachel Dean, a Flexport trade advisory senior associate. When CBP issues those refunds, CBP is going to liquidate your entries, starting the deadline clock on any post-statement correction or protest that was made to claw back money, Dean said.
There's also "a lot of talk about trying to extend your liquidation dates to protect your interest in ... the refunds on the IEEPA tariffs that you've spent in this year," Dean said. But that could affect importers' bond requirements.
"You have to be careful, because I'm sure several of you have had to increase your bond values. You may even have had to put down collateral, and there may be a possibility that if you leave the liquidation days open for these IEEPA tariffs you've been paying in, it'll increase the value that needs to be covered by your bond."
And even if CBP agrees to extend liquidation, there have been cases where CBP has unexpectedly liquidated an entry after agreeing to extend liquidation for it, said Marcus Eeman, director of customs at Flexport. After Section 301 tariffs were imposed during the first Trump administration, "there were cases when CBP said, ‘Oh yes, we'll certainly extend liquidation. Oh and whoopsies, we clicked the wrong button and, no, we aren't going to reset it for you.’ So extending liquidation is haphazard, is a little bit imperfect," he said.
And for importers that choose to go the protest route instead of extending liquidation, legal counsel might be helpful because of the potential increased scrutiny government officials might undertake when giving refunds, Eeman said.
In filing a protest, "you are agreeing to put your entries under a very fine-toothed comb. You're going to ask for a lot of money back, potentially, from Customs, and before they give you a lot of money back, usually people look at it," Eeman said, pointing to standards in 2018 when refunds over $25,000 needed to be reviewed by at least two people.
"Did you make sure your [Harmonized Tariff Schedule] classifications were right? Are there any other considerations here that maybe you want to make sure your I's are dotted, your T's are crossed? Are there any other potential issues with your entries that maybe you want to correct? Because if you have to correct anything else, this may be your one chance," Eeman said. "So, it's important to make sure you're not looking to go too fast with some of these protests."
When the court will issue its decision, and how long importers will have to wait, is unknown, Dean said. "The Supreme Court is hearing the case in November, but that does not mean that the decision will be issued in November. Just because they're hearing it, they can take weeks or months, or they may wait until next session before they issue an opinion on it," Dean said. "We would hope, because they're expediting it, they would issue an opinion more quickly, but it's not a given."
When asked whether an exporter can claim a refund on tariffs from CBP if contract terms called for the exporter to pay them, such as what occurs under duty delivery paid (DDP), Dean said the refunds go back to whoever pays them, including the importer of record or the exporter of the shipper overseas.
"If you're going to pay DDP, you're probably paying more for your goods than you were before, and the reason you're paying more for those goods than you were before is because of these tariffs," Eeman added. "But if the tariffs are now refunded, they don't come back to you. You don't get a refund of this, they go back to the importer. So, you paid more for the tariffs. The seller gets the refund, and though you have a really tight contract, there's no way for you to kind of get any of that money back. So you paid a higher price, and the reason you paid a higher price is because of money that you'll never get back."