A 'mess' of refunds: the US ties itself in red tape over tariffs

Photo: © Paulus Rusyanto

“Now, give it back.” “Give what back?”

Give what back indeed. Last Friday’s US Supreme Court decision got all and sundry hopped-up that refunds were coming. ‘Sit back and watch the cash flood in’ was the sense percolating from the press in the hours following the verdict on the legality of the Trump administration’s tariff regime. Not so.

Those to whom The Loadstar has spoken in the past few days painted a far less clearcut picture on what the process for refunds will be – or even if refunds will in fact come. As far as I/we are concerned, refunds may have been the point all along: a new frontier in American prosperity for those wealthy enough to buy up the rights to refunds from cash-strapped, desperate importers at a fraction of their true value.

As Seko’s director of customs brokerage services, William Jansen, told The Loadstar this week, selling refund rights may provide necessary liquidity in the moment, but may sap resources in the future.

“This refund process could prove to be pretty administratively heavy and even if a company sells their refund rights, I have to assume that they are still married to bearing responsibility for pursuing those refunds,” Mr Jansen said.

“So, that would involve providing the necessary documentation and resources to achieve this. It is not something that we have seen discussed, but I would be really curious to know how much of a squeeze is required from importers after they have sold those refund rights.”

Perhaps more interesting from that conversation with Mr Jansen was the questions he raised over the response to Friday’s verdict from US Customs and Border Protection (CBP), the agency involved in the collection of tariffs.

“The big news that came out to me on refunds, and I’d be curious to see if anyone else has said the same, is that CBP decided to continue collecting IEEPA duties through the end of the day today [Monday]”, almost a full four working days after the court struck them down as an illegal application of the International Emergency Economic Powers Act (IEEPA).

Asked why CBP chose to do this – “surely it’s just creating more work for itself in the long run?” – Mr Jansen suggested that maybe the agency thought it best to continue squeezing the lemon until it was directed to do otherwise. Another source told The Loadstar: “I would have to think the Department of Justice was involved in making that decision.”

This brings us back to our belief (conspiratorial, perhaps) that the whole exercise was just a means of moving money from one group of businesses to a far wealthier group of businesses and individuals – rumour has it some of the president’s close friends have been buying up those refund rights for as little as 10c on the dollar.

Another option is that the administration truly believes in its tariff policy for rectifying the decline of US manufacturing. Delay and prevarication may allow it to not only hold onto the anywhere from $100bn to $300bn in duties collected, but to find a way – as the president has already done – to reintroduce tariffs – and to thereafter redirect the proceeds to building back the country’s lost industrial might.

But is it not obligated to return the money? Did it not agree to abide by the decision of the court? Despite returning a 6-3 majority in opposition to the use of IEEPA to justify the tariff programme, the court did not touch upon the practicalities of refunds, nor did it direct the administration as to what needed to be done with that potential $300bn swelling its coffers.

A point picked up by one of the court’s dissenting voices: “[The court said] nothing today about whether, and if so how, the government should go about returning the billions of dollars that it has collected from importers… that process is likely to be a mess,” said the Trump-appointed Justice Kavanaugh.

Instead, it appears that a lot hinges on the US Court of International Trade (CIT). As reported by The Loadstar, that lower court “confirms that the government’s stipulation regarding re-liquidation applies to all current and future similarly situated plaintiffs.”

And that in turn hinges on the understanding of a key phrase in the CIT judgement: “similarly situated plaintiffs”. Is an importer “similarly situated” based on geographic locale? Annual turnover? Number of employees? There is significant interpretative scope in this phrasing. A scope that seemingly prompted FedEx to sue, rather than chance its luck.

As to that government pledge… not only does it need actioning, it also is not wholly binding.