American businesses could be owed tens of billions of dollars in refunds for tariffs they paid on foreign goods.
U.S. Customs and Border Protection has collected more than $200 billion in tariff revenue from American businesses of all sizes from October through August 24, according to agency data. Of that, more than $70 billion comes from payments of country-based tariffs that a federal appeals court recently ruled President Trump lacked the authority to impose.
Industry-specific tariffs, such as steel and aluminum levies, are unaffected by Friday’s ruling.
The court on Friday ruled that President Trump unlawfully invoked the International Emergency Economic Powers Act, or IEEPA, to impose sweeping tariffs of up to 145% on dozens of U.S. trade partners. Mr. Trump on Wednesday asked the Supreme Court to review the federal appeals court’s decision before it takes effect on Oct. 14.
Mr. Trump’s appeal means that, for now, there’s no guarantee businesses will receive refunds. That spells more uncertainty for enterprises struggling to balance raising prices to cover the cost of levies against potentially turning away customers, according to supply chain experts.
“From the supply chain perspective, we are seeing a lot of uncertainty, which has been the case since April 2,” Scott Pruneau, CEO of ITS Logistics, told CBS MoneyWatch. “No one knows how to price their goods, because you can’t whipsaw your customers on pricing.”
If the court’s decision stands, the U.S. government could have to return billions in tariff revenue it has collected from businesses.
“It’d be very challenging”
But even if the Supreme Court strikes down the tariffs, businesses could still face hurdles in collecting refunds for the levies they’ve already paid the U.S. government, experts told CBS MoneyWatch. For one, there is no guarantee that whatever kind of refund system the government sets up would be automatic or that the process will be simple.
“There’s been speculation that if ultimately, the Supreme Court overturns the tariffs, then Customs could just issue refunds, but I don’t know that it’s going to happen that way,” Felicia Pullam, former executive director of the Office of Trade Relations at U.S. Customs and Border Protection, and the current senior director for geo-commerce at APCO, a global advisory firm, told CBS MoneyWatch.
“The easiest way would be for Customs to put a process in place and issue refunds, rather than make companies go and apply,” she added.
Ultimately, however, if refunds are owed, it would be up to the Trump administration to decide how to administer them. “It’d be very challenging, but I am confident CBP could handle it.”
U.S. Customs and Border Protection didn’t immediately reply to a request for comment.
Requests for refunds
Ted Murphy, co-leader of Sidley Austin’s global arbitration, trade and advocacy practice, told CBS MoneyWatch that if the Supreme Court affirms the federal circuit court’s ruling that Trump’s reliance on IEEPA to impose country-based tariffs was illegal, the government would have to cease collecting tariffs from companies.
When it comes to recouping levies that have already been paid, there are three ways refunds could be administered, Murphy said.
Most simply, the government could provide automatic refunds to businesses for levy amounts paid. “The government has that information, so it could happen automatically,” Murphy told CBS MoneyWatch. “I don’t think that’s particularly likely, but it is an option.”
The government could instead decide that only the plaintiffs who filed suit against the tariffs are entitled to refunds, and require additional parties seeking refunds to bring similar legal actions. “In that case, you’d see tens and tens of thousands of people filing complaints at the Court of International Trade,” he said.
But the most likely repayment option in Murphy’s view would be that the government agrees to refund duties paid by parties who submit requests for reimbursement.
Historical precedent for refunds
There’s precedent for the government reimbursing businesses for tariff payments that were later deemed unlawful. In 1998, the Supreme Court struck down a harbor maintenance tax assessed on exports, which had been imposed by the Reagan administration. The government then owed companies more than a billion dollars in refunds, which it required companies to apply for in order to receive.
Dan Anthony, president of Trade Partnership Worldwide, a trade consultancy, echoed Murphy, saying that it is hard to predict how the government might choose to process refunds, should the Supreme Court determine they are owed.
“It’s up to the administration to decide, and that’s where it gets very complicated and speculative,” he told CBS MoneyWatch.
Technically speaking, issuing refunds wouldn’t be hard. “Theoretically, the government could quite quickly figure out who paid what, and refund it to the payer,” he said. “But the government could also make it very difficult and force people to make requests.”
That would create work for companies, but also for the government, which would then have to review requests for refunds from thousands of companies. “That’s infinitely more work for the government, but it’s pretty clear the government does not want to give money back, so if you make it a difficult process, then a number of importers are probably not going to pursue it,” Anthony said.
Large refunds to businesses could weigh on the Treasury’s finances, TD Securities analysts noted in a report Thursday. “Treasury would likely step up bill supply even further to obtain the extra funds, creating little disruption in longer-dated yields, but potentially pressuring funding spreads,” TD Securities analysts said.
The Trump administration could also turn to other emergency powers to replace the IEEPA tariffs in order to maintain the U.S.’ effective tariff rate, the analysts noted.
Neither the White House nor the Treasury immediately responded to a request for comment.
