Listen to the article 3 min

This audio is auto-generated. Please let us know if you have feedback.

Dive Brief:

• Most companies that have received refunds for defunct International Emergency Economic Powers Act tariffs are funneling the reimbursements back into their operations, according to a survey from the Federal Reserve Bank of Atlanta. 
• Roughly 75% of businesses said they are keeping at least some of their refunds as cash, while 52.5% are using the returned funds to invest in research, development and capital projects, per the survey of more than 1,100 c-suite executives at U.S. firms. 
• Responding executives were allowed to list multiple ways they were using the refunds, with others saying they are giving customers rebates, lowering prices or paying out shareholders.

Dive Insight:

After the Supreme Court invalidated IEEPA tariffs in February, questions arose about when and how companies might get refunds for the levies. In recent months following Customs and Border Protection’s launch of a dedicated portal to issue returns for the tariffs, the conversation has shifted to how companies are using the recouped cash. 

Findings from the Atlanta Fed’s survey, conducted in August, largely held with the institution’s expectations that most firms would keep tariff refund disbursements in house. Indeed, video game console manufacturer Nintendo has specifically stated customers are not entitled to tariff refund benefits, although it later launched a “customer appreciation sale” it credited, in part, to the returns. Meanwhile, companies such as Lowe’s and The Home Depot are offsetting rising supply chain costs with tariff refunds. 

Despite the popularity of keeping tariffs, the Atlanta Fed noted that the percentage of businesses that also planned to give rebates to customers, lower prices and pay bonuses to employees was notable. 

“Although these are surprising uses of cash windfalls relative to the predictions of standard models, these results also suggest that a nontrivial portion of tariff refunds directly benefit customers and employees,” the Atlanta Fed said in a post on its website. 

Retailers Walmart and BJ’s Wholesale Club are among the contingent that have explicitly stated they are using tariff refunds to lower prices, while Burlington is leveraging the funds to “deliver sharper values” to customers. Meanwhile, companies such as Williams-Sonoma are flowing some of their recouped funds back to employees, including those who helped navigate the IEEPA refunds in the first place. 

According to the Atlanta Fed survey, nearly 70% of firms rely on internal staff to manage the IEEPA tariff refund process, while roughly 22% have hired a third party. The survey also found that a slim portion of respondents sold their refund rights. American Eagle Outfitters and The Children’s Place are among the companies that offloaded a portion of their return to shore up cash reserves.  

CBP has paid out nearly $135 billion in IEEPA tariff refunds, as of Sept. 11, with more to come, as the agency is set to launch capabilities to process finally liquidated entries next month.