Final Thoughts: To collect, or not to collect, a tariff refund?

The portal is called Consolidated Administration & Processing of Entries. What a mouthful? Let’s apply the acronym of CAPE.

CAPE is designed to allow importers and customs brokers to file claims for refunds on tariffs assessed and collected under the IEEPA. The US Supreme Court ruled these tariffs are illegal. It is estimated tariffs collected under this section amount to $166 billion and 330,000 importers could be eligible.

Deeper dive

Let’s take a look at what this means for the iron and steel industries. The importation of steel products and their derivatives are exposed to tariffs under Section 232 for national security and therefore are not eligible for refunds.

However, imports of various iron and steelmaking raw materials are eligible, since they are covered by the reciprocal tariffs. These include pig iron, direct-reduced iron (DRI)/hot-briquetted iron (HBI), iron ore pellets, and ferroalloys, to name a few.

The US steel and foundry businesses import tremendous amounts of these materials and have paid tariffs, either directly or indirectly. If directly, they should be eligible. Indirectly is another matter.  

Assuming the applicant satisfies the procedure and documentation required, will the refunded money go to the businesses or individuals who bore the brunt of the tariffs?  At first look, it does not seem so.

Two sides to the story

But there two sides to the story, as the importer can assert they took the risk by paying the tariff, so they deserve to keep the refund.

Under CAPE, the importer of record (IOR), meaning the importer who actually cleared the goods through customs and paid the tariff, is the only entity who is eligible to receive the refund.

It does not matter if the IOR charged the amount of the tariff, or part thereof, to a third-party business or manufacturer, who then may have included this extra cost in the price of the retail or wholesale manufactured products. The IOR can keep this windfall unless they come under pressure from businesses they were supplying.

For example, in pig iron importation, say a trading company paid tariffs for a cargo of pig iron, which they sold to and distributed to several mills, foundries, or other brokers and included the tariff expense in the price they charged each customer.

Technically, the trader can keep the refund to themselves. Of course, their customers can pressure them to share the wealth, but cannot legally enforce it. Even if there is an agreement to share the refund, will the steelmaker or foundry share it with their customers, such as a service center or an OEM supplier to the automotive industry?

This trickledown scenario is as unlikely to happen. After all this, no matter who receives the refund, it seems the actual consumer or small business – who paid an increased price for their raw material, house, car, or toaster – will not receive any benefit from the refund strategy. I hope this was all worth it.

Will they collect?

SMU previously asked two steelmakers whether they would seek refunds for tariffs for the products on which they directly paid tariffs. We either received a “no comment” response or none at all.

It is an understandably “touchy” situation since the steel industry has been a beneficiary of the Trump administration’s tariff policy under Section 232. President Trump stated on April 21 that he would “remember companies that don’t seek tariff refunds.” Maybe the best approach would be for steelmakers not to seek tariff refunds. Is there a “naughty or nice” listing? Will shareholders see things differently? We’ll find out soon enough.