US Supreme Court Tariff Ruling Sparks Refund Debate for Consumers

Alex Grossomanides thought he had scored a deal last year on a down jacket from France – until he received a bill for more than $400 in tariffs and processing fees, nearly as much as the cost of the coat.

It was far higher than he had anticipated, in part because the parka was, unbeknownst to him, made in Myanmar, then facing a tariff rate of 40%, which stuck him with $248.04 in charges.

The Supreme Court has since declared that duty, and dozens of others that US President Donald Trump unveiled last year, invalid, setting in motion a refund process that is poised to be the biggest repayment program in US history.

But even before refunds have started, many of those hit with tariff costs, like Alex, are expecting to be left out.

That's because the ruling only applies to importers who paid the tariffs directly, raising questions about how to address the grievances of those who shouldered the duties in more roundabout ways, such as higher prices, fees, and other charges.

Grossomanides, who paid the tariff via shipping firm DHL, says he would like to believe he will get his money back, but has not heard from the company and is not holding his breath.

"They should be refunding people," the 37-year-old personal trainer from Massachusetts says. "It's all my money and I took the hit for it, which I don't think is fair."

The US Court of International Trade in March ordered customs officials to refund the more than $160bn the government had collected, putting roughly 330,000 importers in a position to potentially win back some money.

Fears that the government would fight the decision have not materialized.

Customs officials working on the issue have said the refund system should be ready to launch this month. They are due to update the Court of International Trade on their progress on April 14.

'I have no hope' of a refund

But fully turning the clock back will be well-nigh impossible. Economic studies suggest that importers have already passed on the majority of the tariff costs in the form of higher prices – an issue that is not tackled in the court rulings.

Lamp-maker Sue Johnson says her small California business has been hit hard by tariffs, which prompted her supplier to roughly double the price of mica, a material she uses in her Art Deco-inspired designs.

But she expects no relief from the Supreme Court decision.

"Maybe they'll get repaid, but I have no hope they're going to refund me," she says.

'Orchestrated theft'

Importers say the issue is complicated. Though many raised prices, they often did not increase them by enough to fully offset the tariff expense.

The tariffs also often triggered other kinds of costs, forcing businesses to take on debt to pay for the duties and leading to harder-to-quantify hits like lost sales.

"Even if we do get refunds, we are still not going to be made entirely whole," Kacie Wright of Houghton Horns, a small Texas-based business that imports musical instruments, said during a forum hosted by We Pay the Tariffs, a small business advocacy group.

She said just making sure her business was lined up to receive a refund has been costly, requiring more than six months of back-and-forth with customs officials to properly register in the agency's online system.

Customs has placed the burden on firms to assemble information to make claims, says lawyer Jared Slipman, chair of the tax department at Obermayer, which has been advising businesses on the process.

He says some businesses, especially smaller ones, may look at the requirements and decide that the potential "juice is not worth the squeeze." He expects others may eventually have to turn to litigation to fully recoup what they believe they are owed.

Consumers, he adds, "get the worst of it."

"It may very well be the case that this is an orchestrated theft from the American consumer... and that would be very unfortunate," Slipman says.

James Tak, who was hit with a $24 tariff charge from UPS last year after receiving a gift of video games from a friend in Japan, says he understands that managing refunds for the millions of people like him is likely to be messy.

He would still like his funds back.

"I just think it's money I shouldn't have to pay," says the 41-year-old, who lives in Washington.

Some shipping firms, such as FedEx, have said they intend to return whatever refund they receive to consumers and businesses.

But many importers have limited their promises, especially companies that passed on the tariff costs in less clear-cut ways.

The debate has sparked class-action lawsuits against several businesses, including retailer Costco, Ray-Bans-maker EssilorLuxottica, and Fabletics, the clothing brand founded by Kate Hudson, which at one point broke out tariff costs on its receipts.

Those suits accuse the firms of being poised to be in a position of "unjust enrichment," getting money back from the government even though they had already passed on the costs.

Government watchdogs like the Federal Trade Commission often pursue consumer issues. But in this scenario, in which government policies are implicated, private pressure is likely the only way to make firms respond, says Adrian Bacon, head of litigation at the Law Offices of Todd Friedman, which brought the case against Fabletics and is investigating other firms.