* CBP collected $166 billion in illegal tariffs from

330,000 importers

* CBP is preparing a refund system that will not require

importers to sue

* Judge no longer demands "immediate compliance" with

earlier order

By Tom Hals

March 6 (Reuters) - The U.S. customs agency is readying

a system within 45 days to process refunds on U.S. President

Donald Trump's tariffs that were struck down as illegal, a

customs official said in a court filing on Friday.

The declaration by Customs and Border Protection official

Brandon Lord came just before government lawyers met with a

federal trade judge to try to hammer out a broad settlement

process, as Reuters reported exclusively on Friday, for

returning $166 billion in tariff payments to around 330,000

importers.

Last month, the U.S. Supreme Courtstruck down as

unconstitutional the tariffs that were a central part of Trump's

economic policy. The court did not say how the collected tariffs

should be refunded, leaving small importers worried the process

would be expensive and time-consuming.

"This new process will require minimal submission from

importers," Lord said in his declaration, filed with the U.S.

Court of International Trade as government lawyers began meeting

with Judge Richard Eaton from the court.

Eaton called the meeting to discuss how the government will

carry out his sweeping order issued on Wednesday directing the

CBP to begin refunding tariffs to potentially hundreds of

thousands of importers using the agency's existing internal

process.

On Friday, after concluding the meeting with the government

lawyers, he said in a court filing he was amending that order to

no longer require "immediate compliance," and appeared to be

giving CBP time to carry out the new system. Eaton said he

changed his order after considering the "declaration of Brandon

Lord."

Eaton said in his Wednesday order that he had been appointed

by the trade court to hear the roughly 2,000 lawsuits filed by

importers including FedEx ( FDX ) and L'Oreal seeking

refunds. Trade lawyers said those lawsuits were the tip of the

iceberg, and thousands more were prepared to sue if the

government failed to develop a system for automatic refunds.

Affiliates of Nintendo ( NTDOF ) and CVS became the

latest large companies to sue for refunds on Friday.

SINGLE PAYMENT FOR IMPORTERS

Lord said in the court filing that the customs agency

expected importers to file a declaration with the CBP's computer

system known as ACE detailing tariff payments, which would then

be validated before refunds are processed with interest. The

importers would not have to sue.

Each importer would receive a single payment from the

Treasury Department, regardless of how many separate entries of

goods the importer had made.

Lord did not estimate how long it would take to process the

refunds, but said the CBP would not be able to comply with

Eaton's order from Wednesday. Eaton contemplated refunds would

be automatically returned to importers through the existing

system without documentation or input from the importer.

"Its 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 said in explaining why

the agency could not use its existing system.

He said importers had paid an estimated $166 billion in

tariffs on more than 53 million shipments. Eaton's order would

have required the agency to manually review paperwork on every

shipment, a process Lord said would require more than 4 million

hours of labor.

'PRACTICAL PROPOSAL'

The U.S. Chamber of Commerce, the largest U.S. business lobbying

group, applauded the CBP's 45-day plan as "a constructive and

practical proposal" to administer refunds efficiently.

"Most importantly, this proposal would spare the hundreds

of thousands of small businesses who are owed refunds from

having to litigate to obtain them," the Chamber's chief policy

officer, Neil Bradley, said in a statement that also encouraged

further refinements.

However, Lord's declaration also indicated that few

importers had signed up for the CBP's electronic system for

refunds. Out of more than 330,000 importers who paid the illegal

duties, only 21,423 signed up for the electronic refund system

that went into place on February 6, according to Lord.

Eaton is overseeing a refund lawsuit by Atmus Filtration

Inc, which the judge is using as a vehicle to order CBP to issue

the refunds for all importers.