How Do You Refund $166 Billion?

0:04Ryan Knutson:In February, when the Supreme Court declared the lion's share of President Trump's tariffs illegal, the justices left one big question unanswered. What did the Supreme Court say about tariff refunds? It said nothing. That's my colleague Lydia Wheeler. Ever since Trump's sweeping tariffs, companies big and small have altogether paid the government billions of dollars. And now, a lot of them want their money back. Is this like the most complicated refund in history? It is a lot of money. It is$166 billion. So, you know, the federal government has never been told that it has to give back that much money before.

0:50And so what happened is the Supreme Court left it to lower courts to hash all that out.

0:58Ryan Knutson:Figuring out who gets refunds and how is a complicated job. And that job has fallen to a little-known trade court and a little-known judge. All of this has put a big spotlight on a little tiny court that no one really knows about and even lawyers often forget exists. and also a very interesting judge who's 77 years old and semi-retired and is now the one at the helm of figuring out how all these people are going to get their money back.

1:31Ryan Knutson:What's at stake here to get this right? I mean, we talk to companies who kind of, the tariffs put them in a crisis. And there are a lot of companies that are really desperate to get their money back. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Thursday, April 2nd.

2:02Ryan Knutson:Coming up on the show, why is it so hard to give businesses their tariff money back?

2:16Ryan Knutson:This episode is presented by SAP. Your company's ambitions can't be held back by long implementation, surprise costs, or empty AI promises. SAP Grow AI Cloud ERP gets you live fast, keeps pricing predictable, and delivers built-in AI that gets results the first day, not someday. All on a single platform that's easy to manage, industry ready and designed to scale with your business. Bring it with SAP Grow. AI Cloud ERP for any size business. SAP.com slash grow.

2:51So introduce us to this little court that has to figure all this out. Right. So this is the Court of International Trade. It's in Manhattan. And it sits across the street from the New York Supreme Court, which is regularly featured on Law & Order. They often do scenes on the front steps of, you know, the New York Supreme Court. Well, right across the street in this other federal court complex is this very modern-looking, smaller building called the Court of International Trade, where these really technical disputes over trade are hashed out.

3:24Ryan Knutson:The Court of International Trade isn't usually a very happening place. Less than 300 cases were filed there each year in 2023 and 2024. The whole purpose of it is to settle disputes over goods that come into the country. They mostly handle claims over tariffs, things that are charged the wrong amount, how things are classified. Every good that comes into the country is given some sort of a classification which determines what duties are owed and how much. And so there are sometimes really technical disputes about, you know, hey, is this glass jar really a glass jar or not? Until recently, one of the court's blockbuster cases focused on whether video doorbell cameras should be considered digital cameras or transmission devices.

4:11Ryan Knutson:Scintillating stuff.

4:15Ryan Knutson:But all that changed a year ago, when President Trump imposed sweeping tariffs on nearly every nation. You know, I keep joking that President Trump has done for trade lawyers what no one thought was possible, which is like made them very cool. They've got all the biggest cases. And so I can see that on a hat. Make trade law cool again. Yeah, he totally made trade law like the big thing. This is where all the litigation is happening. After Trump's tariffs, companies flooded the Court of International Trade with lawsuits, arguing that the administration's tariffs were illegal. And now that the Supreme Court has sided with these companies, the Court of International Trade has to deal with more than 3 ,000 refund requests.

4:59All these lawsuits are largely carbon copies of one another. They're basically copy and paste jobs, except for they have different attorneys and the company name is different, but they all say about the same thing. Like, hey, you know, Supreme Court ruled this and you owe me money.

5:15Ryan Knutson:But one company called Atmos Filtration did something in its lawsuits that the others didn't. It asked for emergency intervention and said it was owed over$11 million in tariff refunds. Do we know anything about Atmos Filtration? So we don't know much about Atmos Filtration. They are a small Nashville-based company. I'm looking at their website. We provide filters, coolant, and chemical products that extend equipment service life and reduce total costs of ownership. Filtration you can trust. Anyway, because of this emergency request, Atmos Filtration kind of jumped the line. And its case fell to a judge named Richard Eaton.

5:58So Judge Richard Eaton is 77 years old. He's semi-retired. He took senior status in 2014, which typically means that the judge hears a lighter caseload. He was appointed to the court in 1999 by President Bill Clinton, So he's been on the court for quite some time. And, you know, lawyers who argue before him say that he's really decisive, but he's very practical.

6:23Ryan Knutson:So he sounds like he's somebody who's gone from being, with all due respect, a very obscure figure in the legal world who was like about to ride off into the sunset to now being one of the most important judges in all of trade law and almost the country. Absolutely. He now kind of holds the fate of like$166 billion in his hands. The United States Court of International Trade is now in session. The Honorable Richard K. Eaton presiding before court number 26-01259, Atmos Filtration, Inc. v. The United States. Last month, Judge Eaton held his first hearing in the Atmos Filtration case. Please sit down, everyone.

7:07Ryan Knutson:At the hearing, Judge Eaton made it clear just how much power he had now. The chief judge has indicated to me that he's going to assign all 2 ,000 cases to me. That number of cases is now up to 3 ,000, by the way. So since all the cases are very similar, he's the one that's saying, you know, I'm handling all of this. and all of this refund litigation, all of these cases that are similar, have now been assigned to me. The law is clear that the IEPA duties were unlawfully imposed and were therefore void from the moment of their imposition. Right away, Judge Eaton is like, listen, you have to pay this money back and it shouldn't be that hard.

7:54You all have done this before. You have the tools you need. just start issuing refunds. This should be easy. I believe that there will be no chaos associated with the provision of these refunds and that it will not result in a mess. And the government was like, wait, wait, wait. This is actually going to be more complicated than you think and we have to create a system and we can't just push a button and give everybody refunds.

8:24Ryan Knutson:Here's the government's lawyer explaining why they thought it would be so hard. There are tens of millions of entries, and so obviously that is going to require a significant effort. At one point, the government's lawyer suggested that the process would require a person to manually review each payment. Judge Eaton didn't seem to buy that argument. We live in the age of computers. It must be possible for the custom service to program its computer so it doesn't need a manual review. You know, Judge Eaton kind of held firm in saying, you owe these companies their money back. The Supreme Court was very clear that these were collected illegally, and you have to work out a process and a system for this.

9:20Ryan Knutson:Cry me a river, basically. Yeah, he wasn't hearing it. I'm going to issue an order. Judge Eaton was so unpersuaded by the government's arguments that he did something pretty bold. He issued a ruling straight from the bench. Judge Eaton is moving at a speed not typically seen at the trade court. He issued a ruling requiring the government to kick off the refund process during that March hearing. When Judge Eaton made that order from the bench, which was basically, okay, just go do it, was that a surprise? I had lawyers, trade lawyers, tell me that it was the order that they were really hoping for but never thought that they would see.

10:01Ryan Knutson:But despite Judge Eaton's speedy ruling, it still might take a long time for companies to get their money back. That's next.

10:20If you've been diagnosed with moderate to severe plaque psoriasis, this is what it sounds like to be a million miles away. Imagine being a million miles away.

10:38Trimphaya, Kuselkumab, taken by injection, is a prescription medicine for adults with moderate to severe plaque psoriasis who may benefit from taking injections or pills or phototherapy. With Trimphaya, clearer skin is possible. In clinical trials, at least 70 % of patients saw at least 90 % clearer skin at 16 weeks. Results may vary. Trimphaya is also indicated for adults with active psoriatic arthritis. serious allergic reactions and increased risk of infections and liver problems may occur before treatment your doctor should check you for infections and tuberculosis tell your doctor if you have an infection flu-like symptoms or if you need a vaccine tap this ad to learn more about trim fire including important safety information the government actually has a

11:29Ryan Knutson:system for issuing tariff refunds. But after Judge Eaton's ruling, the government said it's not quite set up for a refund as massive as the$166 billion collected in Trump's tariffs. They're saying that their system just isn't set up to recalculate payments for this many entries, kind of all at once. And so they said that, you know, we're going to have to update the system that we have in place, and we're going to have to make quite a few changes, and that takes time. And so we need time. And Judge Eaton, so far at the Court of International Trade, has been pretty understanding of that. He's like, okay, you need some more time, I'll give you some more time.

12:07But you still have to show me that you're making progress at this because you owe this money back.

12:13Ryan Knutson:So is there a picture now emerging for how this refund process might actually play out? Right. So the government said that importers are going to have to basically keep a spreadsheet, create a spreadsheet of all of their imports and all of the tariffs that they paid and make their own calculations, basically do their own accounting. And they're going to have to take that spreadsheet and upload it to this new system. And then Customs is going to go through and check them, check their work, and have to validate every claim. And then once they're done with that process, then they'll get their money back.

12:50Ryan Knutson:What do companies think about that? So some companies are already expressing fear and worry that they're not going to know how to navigate this process or that they don't have the time and the resources to go through and try to figure out all of the payments that they made. And they're frustrated because they're saying, hey, Customs already has a system that's kept track of all of this. Like, how come they can't just do it themselves? I mean, right, because shouldn't the government have a record of how much money it's collected and who has paid them that money? Trade lawyers are definitely making that argument.

13:24They're saying, like, why should companies be the one to have to do their own accounting when customs has that ability to do it themselves?

13:34Ryan Knutson:Making things even gnarlier for companies is that now some of their customers are suing them and saying that if you're going to get a refund, you'd better give some of that money to us. So we are already seeing consumers going to court to other federal courts and suing companies to say, once you get a refund, we want you to pass that money back to me. Places like Costco are being sued, and they are facing class actions right now or potential class actions from consumers that are saying, hey, I paid a higher price in the store, and Costco, you said if you get a refund from the government that you will make us whole.

14:10Well, we want to hold your feet to the fire on that.

14:14Ryan Knutson:And there's even more litigation on the way. First, the Trump administration might appeal Judge Eaton's order on refunds. And then separately, President Trump said, OK, well, I'm going to come in and set new tariffs in place under a different legal justification and different legal authority. And so now you have new lawsuits challenging those new tariffs. So while we're still all trying to figure out what's owed from the other ones, we have litigation that's beginning over the new tariffs that Trump put in place right after the Supreme Court's ruling. What an absolute mess. Yeah, there's a lot of litigation, right?

14:56Is there a risk that the process is so onerous that businesses just don't do it? Some trade lawyers are saying that, that absolutely, that they appreciate what Judge Eaton has done, but this is messy. And the process that the government has already mapped out looks cumbersome. and they're worried that some companies are just either not going to do it correctly or that it's going to be too burdensome for some companies to do it on their own and that they won't have any other resources to try to get claims.

15:25Ryan Knutson:Yeah, for these companies, they might be happy that there's a ruling saying that the tariffs are illegal and that they are supposed to get their money back, but it doesn't really wipe away the pain that the businesses went through over the past year. Definitely not. You know, some business owners that we spoke to said, I couldn't grow. I couldn't hire more staff, which I would have been able to had it not been for this. There are others who are now in debt. They had to open lines of credit that had gone dormant. And one company I chatted with, the business owner said, I had to go back to the bank and not only like reinstate my line of credit, but then ask for, you know, an increase in the amount that I was given.

16:03because I have to pay these tariffs up front when my product comes into port. And I just didn't have the cash flow to do that. There are still companies that are like, even though I have this order that says the government owes me money and, you know, Judge Eaton told Customs to start the refund process, like, even though we have that, even once I get my money back, like, it's still going to take me some years to get back into the black.

16:41Ryan Knutson:That's all for today. Tuesday, April 2nd. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Louise Rednovsky and James Finnelly.

16:55Ryan Knutson:Thanks for listening. See you tomorrow.

17:01The Future of Everything is The Wall Street Journal's flagship live event, returning to New York City May 4th through 5th. Be there as CEOs, policymakers, and innovators sit down with our journalists to answer the most pressing questions of the day. From finance, tech, and economic policy to sports, streaming, and style, we're bringing together today's most compelling newsmakers for two days of conversations on what's ahead. Listeners of this podcast can access exclusive discounted rates by visiting wsj.com slash future. That's wsj.com slash future.