Tariff Refunds Become Tangible, Navigating Potential Complications
The potential for businesses to secure tariff refunds has increased significantly following recent Supreme Court arguments regarding tariff levies imposed under the Trump administration. A key focus now is understanding the complexities surrounding the refund process.
Context of Tariff Refund Potential
As of September 23, US Customs and Border Protection reported that nearly $90 billion had been collected from these tariffs. This figure is expected to climb until a ruling is made, which could take months.
Questions Surrounding Eligibility
The eligibility criteria for refunds remain unclear. Justice Amy Coney Barrett raised concerns about the reimbursement process during a discussion with Neal Katyal, representing small- and medium-sized businesses challenging the tariffs. She questioned:
- How will the reimbursement work?
- Will it be complicated?
Katyal confirmed that the five businesses he represents would be entitled to refunds if the court rules in their favor, but other businesses may face significant complexities.
Process and Recommendations for Importers
Thomas Beline, a trade attorney, emphasized that businesses outside Katyal’s representation may need to file separate appeals for refunds. He suggested a focus on importations from recent months and the timing of liquidation determinations by CBP.
- Importers should consider requesting liquidation extensions.
- Filing protests with CBP can help delay final settlements, aiding potential refunds.
Historical Context of Refunds
Katyal referred to a 1998 Supreme Court ruling on harbor maintenance fees, which led to $730 million in refunds over two years. This experience raises concerns, given the much larger sums at stake today.
Expected Administrative Approaches
Experts predict that CBP could streamline the refund process if significant refunds are mandated. Ashley Akers from Holland & Knight suggested:
- Refunds may be issued with statutory interest.
- Importers could need to update payment details via CBP forms.
- Automatic blanket refunds are considered unlikely.
Investment Banks and Refund Claims
Investment banks such as Oppenheimer and Jefferies have approached importers to broker deals, allowing businesses to sell their potential refund stakes for immediate cash. This offers businesses the chance to secure funds without waiting for a final court decision.
- The expected upfront payout ranges from 20% to 30% of the challenged tariff payments.
- This strategy helps businesses avoid public legal filings that could provoke the Trump administration’s ire.
Current Market Sentiment
According to Kyle Peacock, principal at Peacock Tariff Consulting, many importers are feeling pressure from aggressive pitches to sell their refund stakes. Over 100 of his clients have made such sales, often accepting low offers of 5% to 7% of potential refunds.
After the recent Supreme Court arguments, many businesses that have sold their claims expressed regret. Those that held on to their claims felt more cautiously optimistic about the ongoing developments.
