Transcript:

Mike: Hey everyone, welcome back to Disputes and Perspectives. I'm Mike Lowell. I'm a partner in our Washington D.C. office at Reed Smith and the chair of our global regulatory enforcement and investigations practice. I'm here today of the stellar attorneys on our team, Justin Angotti who's also based in D.C. And Justin and I are going to break the courts recent ruling and learning resources on tariffs and what that means companies and what we see coming down the horizon. So Justin, let's just jump into this. What did the court do on Friday and what's sort of left open out there as the big question or issue?

Justin: So the big one coming out of Friday is that the president's tariffs issued under the International Emergency Economic Powers Act or IEEPA are invalid. So that's the fentanyl tariffs that applied to Canada, China and Mexico. It's the worldwide Liberation Day reciprocal tariffs, the Brazil free speech tariffs and the India secondary tariffs that were terminated earlier in February. So all of those now invalid, unaddressed and unaffected, the Section 301 tariffs from President Trump's first administration on Chinese origin along with the Section 232 product-specific tariffs, things like steel, aluminum, that we've seen roll out over the past year. The big unaddressed question in the court's opinion is refunds. There's a focus of a paragraph of Justice Kavanaugh's dissent is the mess that the refund process may be and the billions of dollars that it may result in the Treasury coughing up to importers. That question of whether refunds will be issued will be addressed in the first instance by the Court of International Trade where this litigation started. And unless the government sort of changes its position and the rhetoric we've seen over the past few days, we would expect that they're going to fight and ask the court not to require refunds and that if the court orders refunds, they're going to take an appeal as far as they can potentially all the way back to the Supreme Court. The Treasury Secretary has said this will take years to litigate. President Trump on Friday said, we'll be in court on this issue for the next five years. I don't know that it takes quite that long, but it's certainly not going to be checks for folks in the coming months. So everyone's just going to have to sort of wait to see how the issue plays out the courts.

Mike: It was an interesting ruling. The IEEPA tariff's invalid and obviously those are the ones that have driven a lot of headline and chatter and activity and industry affecting our clients. Where does that leave importers and companies? What are they supposed to do invalid tariffs and entries going back to February of last year that were affected by these tariffs?

Justin: The two main things folks should be thinking about is how they're going to request refunds and preserve their refund rights. It's going to take the court some time to sort this out. And so the two keys to think about are ⁓ administrative protests with asking them to refund unlawfully imposed tariffs, or filing a suit in the Court of International Trade and joining sort of the almost 2,000 importers who have done that. On the administrative side and protests with customs people are gonna be looking at sort of entry by entry or small group of entries by small group of entries And then we would expect that customs is gonna sit on those They've got two years under the regulations to typically decide a protest And so until the refund question sort of gets resolved Don't imagine customs trying to work quickly through those protests and on the flip side importers can be in court sort of join the litigation and then allow the court process to play itself out. And if refunds are an option for importers, then get an order from the directing customs to issue refunds. But those are sort of the two main ways. And I think for all importers, they should be thinking about one of those. That you certainly don't wanna let entries pass and have the protest window close because you will then sort of limited yourself a lawsuit.

Mike: This is something we've talked about before. And we've gotten this question a bunch of times since Friday. How can the court rule that the tariffs are invalid, but refunds are not automatic? Do you want to comment on that at all?

Justin: Yeah, so the theory is that the order to customs directing them to reprocess all the entries and issue refunds is injunctive relief, essentially, which is an equitable remedy. And so what the government is going to do is marshal all the reasons why on the equities of the case, refunds shouldn't be ordered. It's going to be things like the harm to the Treasury that will occur when billions of dollars have to be refunded. There's going to be arguments that importers pass tariff surcharges along to their customers. And so if we refund the money to the importer, they're going to get a windfall, right? They may get back all of their tariffs and have already collected that from customers. So the government's going to marshal any argument it can as to why on balance Friday's decision should be perspective only. you know, Neil Katyal is back and forth with Justice Barrett during oral argument pointed to case in the past in different contexts where the court has contemplated sort of perspective relief on a ruling only sort of left the government to keep funds that were collected even though that action was invalid. So it's not without precedent, but that's what the government's gonna be angling for is that on balance refunds just aren't the appropriate remedy here.

Mike: Can see that become an issue in the midterm elections, I suppose, and potentially beyond, depending on how fast the litigation moves. So what's on the horizon? Tariffs, the most beautiful word in the English language, as you've quoted the president saying before, we know there's already activity. We're sitting here a few days after the learning resources case. We know the president has already announced some tariffs and that's obviously a quickly developing issue. What's he have available to the president? What are the tools and what could he do?

Justin: So I think Friday's decision was not no tariffs. It was not these tariffs. And we've already seen the president pivot to other statutes that expressly authorize tariffs or that have been used in the past to impose tariffs a substitute. So what we're really getting is a reciprocal tariff regime that effective this morning was replaced with a section 122 tariff regime. 122 tariffs are supposed to be balance of payment And so the statute allows the president to impose up to a 15 % tariff for up to 150 days. at that point, after that, Congress can extend those tariffs. As of this morning, we're 10%. president has threatened to increase those to 15%. But that's just your replacement for the reciprocal tariffs, right? That's the starting point. And then he has a number of other tools, some of which take a little bit more work and a little bit more time than IEEPA did. But under any of those tools, can effectively recreate the tariff regime and the negotiating leverage he had in other countries over trade deals. So if we tick through a few of them, Section 232, sort of the national security tariffs that we've already seen imposed on things like steel and copper and aluminum. Those are going to be top of mind. There's an article out this morning reporting that Commerce is already preparing for new investigations on things like batteries and telecommunications equipment. Those are going to take a little time. Commerce gets 270 days to conduct its investigation. The president gets 90 after that to issue his determination of what to do. But they're as flexible as the president wants them to be. There's no limit on the tariff he can impose. There's no durational limit so it really does sort of leave if the administration targets key sectors that are either by volume or by value high imports It is a it's a key tool in the president's 301 tariffs are another and these are the Trump won China tariffs. We've got tariffs that were announced on Nicaragua under the same authority, same sort of setup. US trade representative conducts an investigation. They find that there has been either a violation of US trade agreement or some other kind of unjustifiable, unreasonable or discriminatory trade practice by another country. And then we get a tariff that comes out of that, just like we did with China, typically tied to a set of code so that it's sort of both country and product specific. But again, no maximum tariff rate. On a Section 301 tariff, there is sort of a four year sunset unless there's a request to extend them. So that's how the Trump won China tariffs have continued. another tool the administration already familiar with and has already been using as part of the president's tariff policy. And then you've got some others that sort of float out there section 201 tariffs to safeguard domestic industry Section 338 which would be tariffs to address discrimination against the United States, which has actually never been used to impose tariffs but in those two you're gonna have sort of a ceiling 50 % maximum tariff but Sort of the same setup. There might be some investigation. There might be some opportunity for public comment but it's still going to give the president, although the timeline may take longer, significant flexibility in imposing tariff policy as part of the government's national security and sort of foreign policy and advancing objectives in our negotiations with other countries.

Mike: And I think both Congress and the courts have limited recourse in that. think that the statutory authority for the president to impose these tariffs if he makes the necessary factual predicate findings is pretty solid. It's not going to be quite like the IEEPA litigation.

Justin: Yeah, that's absolutely right. We saw the challenge to the Trump won China tariffs and ultimately, if the president makes the findings he needs and goes through the processes required to that, that pretty much is gonna be solid footing for the administration. So they've been focused on it so far, you wouldn't expect that they're gonna slip up. they do become harder to challenge as long as they sort of cross their T's and dot their I's.

Mike: So it's going to be more of the same in some ways, more tariffs, you know, an increased focus on tariff policy, it's going to be different, right? You gave the French wine example. The president's not going to be able to tweet that there's a significant tariff on French wine and just impose it on IEEPA There's going to be some administrative process requirements.

Justin: Right, he'll have to wait 270 days to do it first when French wine is a national security threat.

Mike: Yeah, and administrative process in Washington means there's opportunities for lobbying, for attempts to political solution. So we're definitely talking to companies about having close links between their legal compliance side, the business strategy side, and government relations team to deal with tariffs going forward. Justin, coming out of this call, what else should companies be doing? ⁓

Justin: Yeah, I mean, for a lot of folks, this feels a lot like April 2025, post liberation day all over again. There's a lot of sort of uncertainty again about what tariffs will come and how they impact business. And we're all going to live with that for a second round. So the key is, think, tracking the investigations that open the windows for comment that exist. Staying on top of what the administration is doing and then ultimately what the president imposes. We'll continue to keep our tariff tracker updated. It's linked in the show notes. Hopefully a helpful resource for folks in doing that. that's really the key is being nimble and being able to sort of track what's happening and then reproject for the business and what that means as the president negotiates trade deals, adjust tariffs or conducts these investigations.

Mike: Thanks, Justin. That was really helpful. So lets wrap this up. I know we're going to have some sessions coming up on the reaction in Europe and other along these lines. But thank you joining us today. Please stay tuned.

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