Tariff refunds could prove to be "poisoned chalice"

Figure of the week

$306,000 President Donald Trump’s tariffs have cost small businesses an average of $306,000 since their imposition, according to research from Center for American Progress (CAP). CAP is a left-leaning think tank.

Quote of the week

“It has happened, at least it’s in process to happen. I wouldn’t get too lost in the details on that.” White House trade adviser Peter Navarro said that President Donald Trump will soon raise global tariffs to 15% as promised last month when the Supreme Court derailed his tariff policy.

Tariff refunds could prove to be “poisoned chalice”

Potential US tariff refunds are proving to be a double-edged sword for companies claiming the rebates . On the one hand, more than $166 billion in IEEPA tariffs is potentially on the table for companies that paid the tariffs — now ruled illegal. On the other confusion and paperwork errors mean it could be years before refunds are processed. At the same time, many shippers are facing claims from suppliers and customers looking to obtain a percentage of the refund. So far, CBP has collected duties from more than 300,000 businesses. However, the refunds process is confusing, and stakeholders complain of a lack of guidance. “This is uncharted territory,” said Cindy Allen, CEO of consultancy Trade Force Multiplier. “I’m getting calls asking, ‘When can I expect my refund? Can I tell my CEO that it’s going to be by the end of the year?’ And the answer is, we just don’t know.” Part of the problem is that CBP plans to provide rebates through a new system called CAPE, which it aims to launch by late April. Refunds must also be lodged via this system, but there is still no official deadline on when it will be open. Likewise, there is increasing concern that any errors in the original tariff payment process could lead to refunds being delayed for a potentially indefinite period. Industry insiders also report that many shippers are worried about potentially being sued by customers looking for a stake in the refunds. Costco and luxury eyewear company EssilorLuxottica have faced such lawsuits recently. Some shippers are reportedly so worried about becoming tied up in potential refunds to customers that they are considering avoiding seeking rebates on the additional tariffs altogether. There are also concerns that clerical errors may have been made by CBP as it faced an avalanche of new and constantly changing tariffs. Some industry studies have revealed mistakes in paperwork in up to 85% of US-bound shipments. This is another worry for shippers seeking rebates, as CBP has promised to closely scrutinize any refund requests for potential customs violations. Shippers see the implicit threat and may be reluctant to open themselves up to potential new audits and penalties. The problems are compounded by the difficulty of finding appropriately qualified staff capable of vetting the paperwork for errors before any application for refunds is made.

Jet fuel becomes supply chain bottleneck

Freight rates are returning to peak season levels as jet fuel price increases pressure the cargo market . In the early weeks of the Iran war, disruption to air freight was mainly caused by capacity shortages. This was largely due to large parts of the fleets of major Gulf airlines like Emirates, Etihad and Qatar Airways being grounded. However, jet fuel prices are now having a greater impact on the market. According to Platts, jet fuel prices are up 100% year on year and could rise considerably more. Even a swift end to the conflict would not necessarily lead to a drop in prices. Airlines depend primarily on the Middle East for aviation-grade kerosene supplies and have been considerably impacted by restrictions on vessels passing through the Strait of Hormuz. Shippers should also stand by for potential disruption to flights from Asia to the US. Fuel storage shortages have started to affect operations in Vietnam. Initial shortages affected only narrow-body aircraft but were expected to disrupt wide-body operations as they became more acute. Thailand has struck a deal with Iran to allow its vessels to traverse the Strait of Hormuz, while Japan and the Philippines are also discussing possible refueling restrictions .

Iran war drives rising container spot rates

Analysts have warned shippers to expect rate volatility throughout Q2 as the effects of the war in the Middle East ripple through supply chains . Drewry has warned that rising fuel costs and geopolitical risk will be the key drivers of freight pricing in the coming weeks. Trans-Pacific rates have increased between 3% and 4% week on week, despite capacity remaining stable, mainly due to the increase in fuel costs. While US shippers have so far been shielded from the effects of fuel surcharges by FMC regulations, they may start to face surcharges from the beginning of April. The rising price of bunker fuel has been caused by the war in Iran and restrictions at the Strait of Hormuz. Availability is also tightening in some areas, including Singapore and China. Shippers can expect delays as carriers adopt slow steaming and alternative refueling strategies. Transatlantic importers were also due to be hit with GRIs on 1 April .

🤔 Did you know ?

EU lawmakers have approved the trade deal between the bloc and the US, clearing the way for tariff cuts on some US imports. The Trump administration had threatened to remove “preferential” terms for the purchase of US LNG if it failed to approve the deal. The European Parliament said it had included safeguards to ensure the US reciprocated certain tariff cuts.

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