U.S. Department of Justice attorneys rebutted an argument that an auto parts company could become entitled for refunds on all tariffs for shipments that would've been eligible for the currently suspended de minimis exemption, according to a May 14 filing in the Court of International Trade.
Axle of Dearborn, which does business as Detroit Axle, argues in a lawsuit that de minimis' end is unlawful and wants the government to refund all tariffs collected as a result of its elimination. This is because the International Emergency Economic Powers Act — the 1977 law which was the focus of the Supreme Court’s February ruling striking down many of President Donald Trump's tariffs — did not give Trump the authority to eliminate the exemption, according to the company.
"Rescinding a tariff exemption is functionally identical not to a quota or an embargo, but to imposing a tariff–and Learning Resources holds that IEEPA does not authorize such revenue-raising measures," Detroit Axle said in an April 23 filing in the Axle of Dearborn, Inc. v. Department of Commerce case.
Before its removal in August via executive order, the de minimis exemption allowed imports of less than $800 to enter the U.S. duty and tax free, a key tool for e-commerce merchants to ship cost-effectively across borders.
Despite the Supreme Court's decision, suspending the de minimis exemption doesn't impose new tariffs, the Justice Department argued. Rather, it allows already-enacted tariffs to apply to imports under $800.
"That is no merely formal difference: suspending the exemption involves no control over the products that will be tariffed, the tariff rates that will be imposed, or the duration of the tariffs," the Justice Department said.
De minimis' suspension has hobbled Detroit Axle, as the company has relied on the exemption to maintain low prices when shipping auto parts to consumers. Detroit Axle said requiring its U.S. customers to pay tariffs on direct shipments cannot be done "feasibly or economically," per its filing. As such, the company has become the importer of record for all shipments from its Mexico facility to U.S. customers due to the change.
Detroit Axle said it is entitled to about $44 million in refunds for tariffs paid on imports previously eligible for the de minimis exemption due to this change in its shipping process. About $9 million of that figure stems from the now-defunct IEEPA tariffs, while the remainder is related to other tariffs. Detroit Axle added that winning the case would entitle it to refunds of non-IEEPA tariffs.
Many importers are on track to receive billions of dollars' worth of tariff refunds on IEEPA levies. But the Justice Department argued that Detroit Axle can't be refunded lawfully assessed duties that could have been avoided if the de minimis exemption were still active.
"If it were able to do so, then presumably other importers could claim that they too would have exercised the de minimis privilege were it available, even if those importers entered merchandise that would not have otherwise been eligible for the exemption or decided not to import any merchandise at all once the exemption was suspended," the Justice Department said.
Additionally, Detroit Axle chose to pay the duties itself post-suspension, rather than having customers pay them, per the Justice Department. That choice to be the importer of record and assume duty liability isn't something that qualifies for compensation, it said.
The Justice Department added that Detroit Axle shouldn't have even been able to claim de minimis treatment for its auto parts from Mexico in the first place, as those imports are subject to National Highway Traffic Safety Administration regulations. Shipments with reporting requirements imposed by agencies other than U.S. Customs and Border Protection may not use the "release from manifest entry process" associated with the de minimis exemption, it said.
Even if Detroit Axle succeeds in its case aiming to revive de minimis in the U.S., legislation signed last year placed a July 2027 end date for the exemption. The company said that wouldn't affect its current entitlement to tariff refunds paid on goods that otherwise would have been eligible for the exemption.
