After a chaotic year of paying higher import taxes, the owner of Sukkah Project in Grand Junction just got a nice surprise: a full refund on tariffs that were ruled unlawful by the U.S. Supreme Court in February.
A partial refund had arrived in mid-May for 30% of the “tens of thousands” of dollars the company paid last year when the Trump administration activated the International Emergency Economic Powers Act, or IEEPA. The other 70% — plus interest — arrived in the company’s bank account Friday, owner Abram Herman said.
“When we got the 30%, I was kind of wondering does that mean this is all or is this a timing thing? There was no communication,” said Herman, whose company sells “klutz-proof” tent-like structures used during the Jewish holiday Sukkot.
President Donald Trump’s “Liberation Day” raised import fees dramatically last year and was touted by the administration as a way to reduce the U.S. trade deficit. But many businesses already had products en route to the U.S. and had to scramble to raise cash to pay tariffs that hit double and triple digits within days. As longtime global trade partners fought back with higher tariffs of their own, the small businesses felt like pawns.
In a recent survey by We Pay the Tariffs, a coalition of small businesses impacted by tariffs, nearly one-third of respondents said they laid off workers; one-quarter cut hours, wages or benefits; and more than half delayed or canceled expansion or investment plans.
Sukkah Project managed to stay afloat because it had negotiated better pricing on its products for last year. But the savings were used to minimize raising customer prices to cover the added tariff expenses. It’s the unpredictability that really hurt companies, Herman said.
“We were trying to time it on our end because there was a period when all of a sudden overnight, it went from 60% to 150% or whatever that crazy period was,” Herman recalled, adding that before last year, there were no tariffs on products of a religious nature. “At that point, I told the one outstanding order we had to hold off on shipping anything because I had a hunch that the current mercurial trade policy wasn’t going to last long. And sure enough, it went back down and we had the order shipped out. It was all pretty hectic.”
Sukkah Project had all its documents ready to submit refund claims when the federal system went live in mid-April, just two months after the nation’s top court ruled that the president couldn’t impose import taxes willy-nilly — reiterating that only Congress could impose tariffs.
The federal government was ordered to refund $166 billion to companies that paid the IEEPA tax to import goods from all over the world. As of June 5, around $95 billion had been accepted for processing and $23.7 billion in refunds paid, according to testimony from Brandon Lord, with U.S. Customs and Border Protection, in an ongoing court case. The Trump administration has said it plans to appeal the refunds, or at least some of them.
Smoother sailing for refunds
The process to apply for a refund has been smoother than expected, said Sandi Moilanen, chief operating officer for World Trade Center Denver, which received support from the state to help small businesses navigate the tariffs.
“For the most part, people who are eligible for the refunds are finding that they’re getting their refunds, that it’s relatively straightforward,” Moilanen said. “Customs put up this whole new system … and it seems to be working.”
But there are other issues, she added. Only companies that were the “importer of record” are eligible for refunds. That means consumers who paid higher prices, or businesses that saw tariff fees tacked onto bills from their vendors, aren’t eligible.
“There’s no ruling to say, hey vendor, you need to pass that along to your customers even though the vendor did pass along the initial (tariff) cost to customers,” Moilanen said. “It’s the vendor who gets the refund.”
For those in that situation, Moilanen suggests talking to your attorney and looking through the sales contract.
“You want to make sure that in the vendor-and-client sales contract there’s something about tariffs, and when you get a refund, you pass it along,” she said. “We’ve never had to worry about that before.”
Customer refunds unlikely
Blaming tariffs for higher prices and then applying for refunds has become a public controversy for some well-known companies. Costco was one of the big names to sue the Trump administration over the tariffs last year. Now, the retailer is getting sued by customers who want part of any refund the company receives. Costco asked the court in May to dismiss the case because it hadn’t even received a refund at the time.
Extricating the IEEPA tariffs and figuring out how to refund customers would not be an easy task, said Douglas Inskeep, chief operating officer at Clear Comfort Water, a Louisville company that makes water-treatment systems for swimming pools, cattle troughs and data centers.
For the most part, Clear Comfort is the customer and is not the importer of record. Its products are made in the U.S., but many of the parts are imported. Their vendors passed the tariff costs on to customers and, so far, his vendors haven’t said a peep about passing on any refunds to customers.
Still, Inskeep understands that it’s not easy to refund customers. Clear Comfort recently completed an application for its own IEEPA refund, which could bring in up to $20,000, he said. Faced with high tariffs last year, Clear Comfort imported a custom injection-molding machine from China to make one product instead of having to import it from China and deal with unpredictable tariffs. However, there was a tariff on the machine.
“Typically, these products are spread out over multiple products and in some cases, multiple customers. It gets super complex,” Inskeep said. “And so there’s no intention on our part to offer refunds to our customers and subsequently, we’re not going to our vendors and saying, ‘Hey, we want our money back.’”
However, he said, those extra fees are still showing up on some invoices, which never happened before last year. “It’s probably something I need to follow up with them,” he said.
More changes could be coming in July
July will be a busy month for global trade. The U.S.-Mexico-Canada Agreement, enacted by Trump in 2020 to replace the North American Free Trade Agreement, is up for renewal this month. There’s speculation that Trump might pull out of the free trade agreement, The New York Times reported.
And after the Supreme Court ruled against the IEEPA tariffs, Trump said he would impose a new 10% tariff as an alternative. These Section 122 tariffs are limited to 150 days, which ends July 24.
“There are lawsuits very similar to what the Supreme Court decision was on IEEPA and whether the 122 10% tariffs are also illegal or not used in the right context so there might be another round of refunds,” Moilanen said. “At least the process will be in place with customs to refund it. … (Tariffs are) still very relevant.”
Herman is relieved to get some of the fees back, but there are other new tariffs the company is now paying. At least the year has been a bit more predictable, he said.
“When we can anticipate it as a business, it’s one thing because we can base our pricing on that and we can make decisions based on that,” he said. “When it comes to a brand new major tariff and it’s being implemented five days from now when our ship is literally on the water, that puts businesses in a pretty hard place.”