(March 10): A US trade court has revived a challenge to US President Donald Trump’s move to end a tariff exemption for low-dollar imports, resuming a legal fight with financial stakes for online retailers and small businesses as well as Americans who directly buy goods overseas.
Litigation over what’s known as the 'de minimis exemption' was on hold while the US Supreme Court considered a broader dispute over Trump’s global tariffs. The justices in February struck down his use of an emergency powers law to impose duties but didn’t address his authority to halt the exemption for low-value packages — a related but separate question.
Trump signed executive orders over the past year suspending a longstanding tariff carve-out for imports with a retail value of US$800 (RM3,152.80) or less. US-based auto parts distributor Detroit Axle, which brought the lawsuit, contends the president unlawfully overrode Congress, which set that floor for duties.
The New York-based US Court of International Trade lifted the pause on the exemption case on March 5. A three-judge panel set a schedule for written briefs that wraps up in April. If the court rejects arguments by the US Justice Department, which is defending the administration, Trump’s tariff policies once again could be on a path to reach the Supreme Court.
White House spokesperson Kush Desai said in a statement that “the president has lawfully exercised the powers granted to him by Congress to suspend de minimis exemptions and the administration will vigorously defend this policy shift to safeguard our national and economic security.”
A trade court judge has ordered the administration to take steps toward refunding tariffs the Supreme Court declared unlawful, a process that would appear to cover at least some of the duties paid on low-value imports. But the litigation over the future of the exemption involves other tariffs as well.
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Customs and Border Protection announced in December that it had collected more than US$1 billion in tariffs on imports that would have fallen under the exception. The agency didn’t break down that number by tariff type. A spokesperson didn’t immediately respond to a request for comment on Monday.
Detroit Axle says it paid tens of millions of dollars to bring in goods that should have been exempt, including “auto-part-specific” duties that weren’t before the justices.
After the Supreme Court ruled against Trump’s use of the International Emergency Economic Powers Act, or IEEPA, he imposed a fresh round of global tariffs under a different authority. A coalition of Democratic state officials and several small businesses has sued.
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“The massively increased costs resulting from the tariffs have caused significant uncertainty and devastated Detroit Axle’s profitability,” the company’s lawyers wrote in their complaint.
The trade court last year denied Detroit Axle’s request to restore the exemption while the case was pending, citing the other pending cases against Trump’s tariffs.
Congress passed a measure last year getting rid of the exemption but Detroit Axle argues lawmakers built in a two-year delay to give businesses time to prepare. If courts strike the administration’s suspension of the exemption now, it could set off another refund push.
“The Supreme Court’s decision made clear that the de minimis repeal was unlawful," the company’s attorney, Thomas Dupree Jr, said in a statement. “The laws and Constitution of the United States do not allow the exemption to be abolished in this way.”
Trump’s executive orders halting the exemption cite the same national emergencies he relied on in imposing the tariffs struck down by the Supreme Court, focusing on the flow of illegal drugs. He signed the latest action on Feb 20, the same day the justices ruled.
A Justice Department spokesperson declined to comment.
Tariff refunds
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Meanwhile, the federal trade court judge assigned to oversee the refund process nationwide is pressing Customs and Border Protection for details on its progress developing a plan to issue refunds — with interest — for tariffs that Trump imposed under the emergency powers law.
Judge Richard Eaton wrote on March 6 that “the clock is ticking” on refunding approximately US$165 billion in IEEPA duties and that interest on the duties is accruing at a rate of about US$650 million per month. He ordered government lawyers to submit an update by March 12.
“American taxpayers will bear this financial burden,” Eaton wrote.
A customs official told Eaton in an affidavit last week that the agency was “making all possible efforts” to create an automated refund system that “will be simpler and more efficient” than its current process and may be ready in as few as 45 days.
Eaton previously ordered the administration to immediately start removing Trump’s emergency tariffs from its massive backlog of importers’ paperwork and to recalculate levies it had already finalised — a process that normally would trigger refunds.
The judge said that doing so would make future refunds easier and he questioned why the government hadn’t already stopped after the Supreme Court’s ruling last month.
In the affidavit, Brandon Lord, a top trade official with the customs agency, said that the government has identified about US$166 billion of IEEPA duties collected from more than 330,000 importers with 53 million individual entries.
The customs agency’s “existing administrative procedures and technology are not well suited to a task of this scale and will require manual work that will prevent personnel from fully carrying out the agency’s trade enforcement mission", Lord wrote.
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