Imports Into US Surge to Avail Low 10% Duty
Chocolate makers and fig-paste importers
are facing a tangle of unknowns, including whether to seek refunds for tariffs
invalidated by the Supreme Court.
1.
New Tariff Push After Court Ruling:
After the Supreme Court of the United States invalidated several prior
tariffs, Donald Trump moved quickly to rebuild his trade program using
alternative legal authorities.
2.
10% Across-the-Board Tariff Imposed:
The administration invoked Trade Act of 1974 (Section 122) to impose a
10% tariff on U.S. trading partners for up to 150 days, with threats to raise
it to 15%.
3.
Further Tariff Tools Under Consideration:
The administration signaled possible new duties
under:
o
Section 232 of the Trade Expansion Act (national
security basis)
o
Section 301 of the Trade Act (unfair trade
practices)
These processes require investigations and hearings, potentially taking months.
4.
Business Uncertainty Deepens:
The shifting legal basis and unclear rates have disrupted planning, investment
decisions, and supply chains. Many firms are in “wait-and-see” mode.
5.
Import Surge Expected:
Trade lawyers anticipate a short-term spike in imports during the 150-day
window, as companies rush shipments before potential tariff increases.
6.
Refunds Create Legal and Contractual Confusion:
Over $100 billion in tariff revenue may be subject to refunds.
o
Treasury Secretary Scott Bessent indicated
repayments could take months and depend on lower court rulings.
o
Companies may have only 180 days to challenge
tariff assessments with U.S. Customs and Border Protection.
o
Many importers may need to file cases before the
Court of International Trade.
7.
Small Businesses Hit Hardest:
Smaller importers lack legal resources to navigate refund procedures or
anticipate policy swings, increasing financial strain.
8.
Contractual Disputes Loom:
Companies that passed tariff costs to customers face questions about whether
refunds must be returned. Some firms feel contractually obligated; others plan
to retain refunds to stabilize finances.
9.
Corporate Strategy Adjustments:
Businesses previously shifted sourcing (e.g., from China to Vietnam) or
stockpiled inventory to hedge against tariffs, often at significant cost.
10.
Broader Economic Impact:
Continued tariff volatility risks:
o
Delayed capital investment
o
Supply chain inefficiencies
o
Legal disputes
o
Heightened trade uncertainty
Overall
Implication:
The administration’s rapid pivot to new tariff
authorities has reintroduced instability into U.S. trade policy. While intended
to preserve leverage, the evolving legal landscape is complicating business
operations, triggering potential refund litigation, and prolonging uncertainty
across industries.
President
Trump’s whipsawing trade policy last year destabilized many American businesses.
His new push to replace the system with a different batch of duties has bewildered
companies all over again.
Since
the Supreme Court invalidated many of Mr. Trump’s tariffs last month, his administration
has vowed to use other legal authorities to rebuild the program. Almost immediately,
Mr. Trump wielded an unproven legal provision to enact a 10 percent across-the-board
tariff on U.S. trading partners and threatened to raise the rate.
The
haphazard rollout has introduced a tangle of unknowns for companies. A new tariff
system could upend months of business decisions, and many companies are bracing
for prolonged uncertainty.
They
are also considering whether and how to seek refunds on tariffs they paid — and,
if they receive them, whether they would return any money to customers.
Peter
Furth, whose company, FFF Associates in Stamford, Conn., imports fig paste from Turkey and Spain, said Mr. Trump’s tariffs had driven
up costs and destroyed his cash flow. Mr. Furth has been passing on the additional
costs to his customers, which include Mondelez, the maker of Fig Newtons; Nature’s
Bakery; and J&J Snack Foods. He said he believed he had a contractual, and moral,
obligation to return any tariff refund to customers.
“I
owe it back to them,” he said. “It’s very simple.”
Smaller
businesses like his have been particularly unmoored by the latest shifts in trade
policy because, as during last year’s tariff chaos, they lack the legal and financial
resources to weather unpredictability smoothly.
“The
level of uncertainty is crazy,” said Matt Weyandt, a co-founder of Xocolatl Chocolate, a craft chocolate maker in Atlanta.
Mr.
Weyandt, whose company sources cacao beans from countries including Peru, Nicaragua
and Tanzania, is trying to establish whether exemptions on foreign agricultural
products previously enacted by the Trump administration still stood, to no avail,
he said. He was intrigued by the prospect of seeking a tariff refund, he said, but
had no idea how to go about it.
“We
just don’t have teams of lawyers to go out and sort through this stuff for us,”
he said. “It’s going to be us stopping everything that we’re doing to spend however
long it takes to sort through it.”
Richard
A. Mojica, a lawyer at the firm Miller & Chevalier Chartered in Washington,
said he was fielding a barrage of questions from clients about what tariffs would
look like, and the possibility of refunds for levies that had already been paid.
He said it felt similar to the period after “Liberation Day” in April, when Mr.
Trump announced broad tariffs that unleashed a flood of uncertainty.
Mr.
Trump ordered the blanket 10 percent tariffs in February using Section 122 of the
1974 Trade Act, which allows the administration to impose tariffs of up to 15 percent
for 150 days without congressional approval. A day later, Mr. Trump said on social
media that he would raise that 10 percent tariff to 15 percent. But the change never
materialized, and the White House has said it is not clear when it will happen.
Mr.
Trump has a variety of other tariff authorities at his disposal. The administration
has signaled that it will move forward with new
tariffs using Section 232 of the Trade Expansion Act of 1962 and Section 301 of
the 1974 Trade Act.
Those
tariffs would take months to carry out, as the administration completes the investigations
and hearings those statutes require. Companies are likely to try to influence the
process, because if issued, these tariffs would be less vulnerable to legal challenges.
Mr.
Mojica said he expected some clients to accelerate their shipments out of concern
that tariffs could rise further once the administration figured out how to replace
them.
“I
think we’re going to see a surge in imports in the short term within this 150-day
window because the rates are going to be comparatively lower than what they had
before, and because they don’t know what the rates will be after the fact,” he said.
If the 10 percent rate rose to 25 or 50 percent, he said, then 10 percent would
be “comparatively speaking a pretty manageable rate.”
Braxten
Wilding, the vice president of finance at Wilding Wallbeds,
a manufacturer of Murphy beds in St. George, Utah, said his company rushed to stockpile
inventory last year in response to the tariffs, tying up money that would otherwise
have gone toward new machines and buildings.
He
welcomed the possibility that the new tariffs would include a lower rate on China,
where the company sources metal components and mechanisms, and was supportive of
tariffs in general. But the lack of clarity had put the company on pause.
“We’re
in a little bit of a wait-and-see mode,” he said, adding, “We still feel like we
need to be on guard.”
Money Back
Refunds
are another open question. The federal government has collected more than $100 billion
in revenue on tariffs that the Supreme Court struck down, and the Trump administration
indicated last year that it would provide repayment if the tariffs, issued under
the International Emergency Economic Powers Act, were deemed unlawful.
After
the Supreme Court’s ruling, Treasury Secretary Scott Bessent said refund payments
could take months and would be determined by lower courts.
“It
is not up to the administration,” Mr. Bessent said.
The
administration moved late last week to try to slow refund proceedings, arguing that
it needed more time to determine the path forward.
Decisions
about whether, and how, the government would refund tariff revenue could lead to
contractual disputes between companies that paid tariffs and their customers, who
may have had that tariff cost passed on to them. Companies including FedEx, Dyson
and L’Oreal have filed lawsuits since the Supreme Court’s ruling.
Small
and midsize U.S. importers might not understand the procedural requirements for
securing refunds, said Matthew Seligman, a fellow at the Stanford Constitutional
Law Center, whose law firm specializes in tariff refunds.
“Most
people thought they would automatically get their money back, kind of like a tax
refund, and that is decidedly not how it works,” he said.
He
said he believed that once the tariff assessment was final, companies would have
no more than 180 days to challenge the U.S. Customs and Border Protection agency.
If the challenge is denied, he said, “every single importer will have to file a
lawsuit.” He is advising his clients to both petition the customs agency and file
lawsuits with the Court of International Trade to speed the process.
Jeremy
DeFilippis, chief executive of Jetty, a clothing company
in Manahawkin, N.J., said any refund would be a financial boon.
Jetty
buys board shorts, shirts and other apparel from suppliers in China, India, Vietnam
and Guatemala, and Mr. DeFilippis estimated that the company
paid $250,000 to $300,000 in additional tariffs last year.
To
help alleviate the extra tariff burden on imports from China, Jetty had moved some
production to Vietnam last April, which Mr. DeFilippis
said had resulted in lower quality and delayed shipments. It decided not to raise
prices for retail customers, taking a hit to its profit margin.
If
he received a tariff refund, he said, he would use the money to shore up his company’s
finances. “It would really help in the short term with operating expenses and labor,” he said. “It’s not like we’re going to give out vouchers
to customers.”
But
he also said he had not tried to get a refund and did not know how long the process
would take. “It’s just a complete mess,” he said.