Podcast: How manufacturers can navigate the new CBP tariff refund portal

BJ: I think the first thing you want to do is, you know, look at that timeframe from April to February and gather all of your import records, all of your form 7501s, and then look through those forms and try to determine which tariffs that you paid fell under that IEEPA heading because people were paying a multitude of different tariffs and they didn't all fall under that specific provision, which was declared illegal by the Supreme Court. And so it's going to be important to sort of sort through what you paid and what within that amount is actually eligible and really only try to apply for the things that are eligible because any misstatements in your application are going to slow the process down and may force you to go back to the beginning and try all over again.

AS: Are there any other common mistakes you think companies might be making that they should try to avoid?

BJ: Certainly trying to avoid overstatement, you know, that could be a red flag and could send you to the back of the line. And certainly you don't want to be filing anything that's false. But I would just expect a little bit of friction here. While, you know, I think we're still in early days of the application process, and I'm sure everyone involved is trying to figure this out. And so it may not be completely smooth from end to end, but hopefully these applications are going in and are being decided expeditiously. And, you know, hopefully there is an ability to interact with the Bureau if you have questions or if something, you know, happens to be a little bit unclear along the way. I personally have not applied for any of these. I haven't really gone through the process. So, you know, I'm telling what I've been told, but not, yeah, I don't have firsthand experience, unfortunately, in processing this.

AS: For manufacturers that, you know, paid significant tariffs, how, you know, meaningful can these refunds be financially?

BJ: Well, it can be as meaningful as what was paid out during the process. And we're talking about a pool of an estimated $166 billion. So that is substantial. That could have a meaningful impact on the U.S. economy if it were all to come back in the third and fourth quarter of this year. But it really depends on the business. And really, we're talking about something that could be a windfall for a number of importers and wholesalers who may have brought goods into the country, paid the tariff on them, and then quickly transferred those goods on throughout the supply chain.

In many cases, a lot of the institutions that are eligible for a refund here weren't necessarily disadvantaged tremendously by paying the tariff because they pass those tariffs on to their customers. Unfortunately, the only eligible entity who can apply for this refund is the importer of record or the import broker. And often they were simply a middleman who was processing a transaction.

Now, I'm hopeful that many of your listeners and readers are the end manufacturers who were doing or handling the logistics of importation for themselves, and therefore they are the ones who are eligible for the refund. But I think in many cases, there's often a wholesaler or a middleman sitting there who is the importer of record and will therefore be the one receiving the refund here.

AS: As you brought up, a lot of the tariff costs were passed on to consumers. Do you think the average consumer in maybe the next few months or just in the future can expect any kind of financial relief from these tariff refunds in the form of possibly lower prices?

BJ: Well, I think there's a possibility that some of this money can trickle down through the supply chain. Certainly, if I had a wholesaler who I had bought a lot of goods through, who I knew just received a windfall, you know, I'd be requesting some of that in the form of future orders. I think it's pretty unrealistic that most of these importers of record who do receive large refunds will simply turn around and distribute the refunds pro rata based on who they sold goods to in the past. I think, there's no legal requirement for them to do that. And in reality, if they are going to give back, it's likely to be in discounts on future orders, and those are likely to need to be negotiated. So, you know, hopefully there are strong relationships between the importer of record and their customers, and they do plan to share, but really that's up to them. There's nothing in the bill or in the court order that requires that to happen.

AS: Are there any industries or, you know, consumer goods categories that you think are the most likely to see these downstream effects?

BJ: Hard to say. I'm not sure that any one industry over another would be more willing to pass on those savings. Certainly, you know, the biggest importers are going to be the ones with the biggest checks. And I would also say that the biggest importers of record are going to have the resources to make sure that they are first in line with all of their I's dotted and their T's crossed. The more money you have riding on the refund, the more likely you are to file and file accurately and potentially even take legal action if you're not satisfied with the results that you're getting from your application. So, as in many things in life, those with money, size, and power tend to have the best outcomes when it comes to these transactions.

AS: If you were advising a manufacturing company or, you know, a manufacturing CEO, what is the most important piece of advice or what would you want to make sure you wanted to get across to them today about how to go about the whole tariff refund process?

BJ: Yeah, I just would be very diligent, make sure that your accounting team is on this. And, you know, they may even want to consult with some outside experts who have real knowledge of working with the government to ensure that this goes smoothly. But at the end of the day, you know, the government seems to want to make this right. I would also say that, just yesterday, another decision came down from the Court of International Trade, who ruled against the Trump administration's use of Section 122 of the Trade Act of 1974.

So, once the Supreme Court made their decision in February, the Trump administration quickly moved to replace a number of the tariffs that they had been using under the IEEPA, and they replaced them with Section 122 of the Trade Act of 1974, which allowed them to levy up to 15% emergency tariffs on countries for 150 days. That was intended to be a stopgap to buy time in order to then move to the use of Section 301 of the Act, which allows the President to impose tariffs to combat, quote, forced technology transfers, intellectual property theft, or excessive manufacturing capacity, end quote. That's right from the Act.

So, what the administration was intending to do was, ‘Hey, for 150 days, we can buy time using Section 122, and then in that time, we'll do a bunch of investigations and into a number of different countries, and then we'll use Section 301 to impose additional tariffs that due to intellectual property theft, excess manufacturing capacity, things like that.’ What the Court of International Trade ruled was that Section 122 was being used improperly by the administration. Now, the administration is going to appeal that, so there has been no determination that refunds are going to be warranted here, and as far as I understand, the administration is still implementing this tariff during appeal.

It's unclear to me whether this goes all the way to the Supreme Court, but given that they picked up the last case, it very well could go all the way to the Supreme Court. So, you know, the bottom line is there's just more uncertainty coming around tariffs. It's really hard to predict exactly where we're going to land around all of this. And on top of that, the president goes to China next week to negotiate with Xi Jinping about tariff policy overall. So, keep your eye out for future court decisions, what that could mean in terms of future potential refunds. and keep your eye out for additional changes in tariff policy because the only constant is change when it comes to tariff policy these days.

AS: I really appreciate you joining me today.

BJ: Thank you very much.

About the Podcast
Great Question: A Manufacturing Podcast offers news and information for the people who make, store and move things and those who manage and maintain the facilities where that work gets done. Manufacturers from chemical producers to automakers to machine shops can listen for critical insights into the technologies, economic conditions and best practices that can influence how to best run facilities to reach operational excellence.

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