Key facts
- Companies are seeking refunds for tariffs imposed by the Trump administration, following a Supreme Court ruling.
- Some Chinese companies are deterred from claiming refunds due to increased U.S. scrutiny of trade fraud.
- Retailers are selling their tariff refund claims to third parties for immediate cash, often at a discount.
- Shipping companies are obligated to return collected tariffs to customers, while many retailers are not.
- Billions of dollars in tariff refunds are being processed, but consumer benefit is uncertain.
Global companies, including some from China, are successfully reclaiming millions of dollars in refunds for tariffs that were improperly charged by the U.S. administration under President Donald Trump. However, heightened U.S. scrutiny of trade fraud is deterring some Chinese firms from attempting to claim these refunds.
Retailers facing liquidity needs have increasingly sold the economic rights to potential tariff refunds to third-party buyers, a practice known as tariff refund monetization. This emerged amid legal disputes over tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Buyers offer upfront cash in exchange for the rights to future refunds, often at a significant discount.
American Eagle Outfitters, for example, sold $68.9 million of its refund claims for $18.6 million in cash. The Children's Place also entered into an agreement to sell $38.2 million of its claims for approximately $25.7 million. Investment firm Oaktree Capital Management sued BJ's for allegedly withdrawing from a deal to purchase a $29 million refund claim.
Experts note that while selling refund rights offers quick capital, the risk lies in the steepness of the discount and the economic uncertainty of when the refund will actually be received. Companies must weigh accepting a lower upfront amount against waiting for the full refund plus interest.
Shipping companies like UPS, DHL, and FedEx are obligated to return tariff refunds to customers they explicitly charged for them, as they collected the tariff directly. However, many retailers are not expected to pass these refunds to consumers because the cost of tariffs was often integrated into higher product prices, making it difficult to isolate and refund specific amounts to individual shoppers.