A (3:24)

Yeah, yeah, the decision. As expected, the Supreme Court only ruled on the merits of the President's power and did not get into the sort of administrative side of remedies. Other than in the dissent, there was a fair bit of discussion on the chaos that is likely to ensue, and I think we can all agree that will be the result of this in some manner. Under US Law, it's pretty clear that when a tariff is ruled invalid that the government can't retain the funds that it received based on those invalid tariffs. It's deemed an unlawful exaction to keep those funds. So there undoubtedly will be some mechanism for refunds here. But those refunds, for one thing, will be limited only to the importers of record that paid those tariffs to the government purchasers that bought goods subject to the tariffs that maybe reimbursed the supplier for all or a portion of those tariffs. They will not be entitled to any form of refund from the government. In that case, there'll have to be a lot of examination of the underlying contracts to see what they provide, if anything, with regard to refunds for a supplier that itself receives a refund from the government. A lot of contracts, particularly contracts entered into prior to all these tariffs being imposed starting last February, didn't address refunds. And it's really only more recently that those clauses have been routinely included in agreements. So there's undoubtedly going to be a lot of disputes arising and a potential windfall for suppliers who paid these tariffs but were ultimately reimbursed. So, you know, that. That on its own will be quite chaotic, but it is clear in any event that the importers that paid these duties to the government will be entitled to some form of refund. Although it's a bit unsettled at the moment what the process will be for requesting those refunds, what the timing will be. There's sort of a process that the courts and customs have followed in the past in these types of situations. But there's a lot of open questions right now.

B (5:38)

One question that I have beyond the chaos that'll happen if we actually get these refunds and then who's entitled to keep the money is can the administration rely on a separate provision and say, well, you know, Argue in the alternative. Look, if we had, we've imposed this tariff, we said we were relying on X authority to do it, but we could have done it under Y authority. And so we want to retroactively rely on Y authority as well. And so therefore no refunds are due and the tariffs stand.

A (6:12)

Yeah, I mean, everything's possible. I think it's unlikely that they might try and make that type of argument, but I don't think there's very good legal grounds that that would be ultimately successful. The administration has already announced, just before we started recording, that they're going to immediately impose a 10% tariff prospectively under section 1, all future imports globally. So they're clearly going to rely on other statutory authorities to keep tariffs imposed going forward. But I don't think they're going to be able to successfully sort of validate these tariffs going back retroactively and be able to avoid refunding most of that money. They very well, or at least very likely will challenge aspects of, you know, who is entitled to a refund and timing and things like that. So they, they may try and limit the scope, but I don't think they'll be able to retroactively validate the tariffs and avoid any refunds.

B (7:12)

So what do you expect is going to happen now going forward? I mean, clearly, you know, this tariff that they've already announced to try to impose a 10% tariff going forward. I read something that there's some other authority from the 1970s under some trade act that says that president can for short term, for like 150 days can impose a 15% tariff. Is that, you know, do you think what's going to happen now is we'll have some other tariff put in place as a stopgap and maybe the administration will have to go through Congress or they'll try to rely on things that they can do by executive order or. Where, where does this seem like it's headed in the short term?

A (7:52)

Yeah, the. Well, what you're referring to is actually what the President just announced. So he's imposing 10% duties under that Section 122 statute that does have a time limitation of 150 days and Congress would have to agree to extend it. That's clearly a short term measure. The President also has authority under something called Section 338 of the Tariff act of 1930 that allows higher tariffs up to 50% with no statutory deadline that he may take advantage of, although that statute is perceived as being vulnerable to judicial challenge based on sort of how vague and overbroad it is, and it's never been used for that reason. And then there'll be other, you know, the other traditional statutory authorities like section 232 and 301 for unfair trade practices and national security. Undoubtedly we'll hear about a lot more investigations being initiated. Those other authorities, though, require investigations and rulemaking, and they take longer. So I'm sure this initial action is just the first of what will be a blizzard of additional tariff actions in the coming days. But as far as the refund opportunity for the IPA tariffs, the way that usually plays out is that the Court of International Trade will now be empowered to administer the remedy. You know, they've already indicated a willingness to and the power to what they call reliquidate entries. And that's basically just means opening up for review entries that have formally closed out, which usually happens about 314 days after entry. So they, they very well may issue an order that, you know, sort of opens those closed entries for amendment, and then they usually defer to Customs to go ahead and sort of develop the actual procedures for providing for accepting requests for refunds and granting them. And, you know, this is a little bit unprecedented, the amount and volume that we'll be dealing with here. But for what it's worth, in prior instances where tariffs have been ruled invalid, albeit on a much smaller scale, Customs will publish, either in the Federal Register or in the Customs messaging system, an opportunity for importers to either file a, what's called a post summary correction, which is for entries that have not liquidated, so open entries, where you can just amend those entries and seek to, you know, reenter them without the tariffs being owed, or for liquidated entries to just file a protest. So kind of the very standard mechanisms that have been in place for amending entries, regardless of these types of decisions, if that's the procedure that's followed here, which is possible, the sheer volume will be rather daunting. And I would suspect there'll be thousands and thousands of these filed, which means, practically speaking, it will take years before all of these back duties are actually paid out, given the amount at stake. It's also possible that Congress will get involved and try and pass legislation that governs. I don't know that they could, you know, prohibit the reimbursement of these fast tariffs that were paid, but they could implement legislation that limits the amount paid per year or the sort of the procedures that have to be followed, sort of the timing and other administrative aspects that could draw out the process even longer as you can Imagine. And of course there's still the threat of this government, you know, trying to challenge the decision in some way at the margins. But it's definitely going to be chaotic, it's definitely going to be messy. It may be the Port of International Trade is inclined to develop an alternative administrative process that doesn't require all these thousands of filings. But there's also sort of still the, the option for people to file with the CIT a complaint demanding refunds. And some parties are still doing that even after the ruling. I've had a couple requests because they want to try and get first in line for a refund. And there's some belief that filing at the CIT will circumvent some of these extended administrative processes that will be implemented. So we're still very much in a wait and see mentality to see what the remedy will be and what the process will be. In the meantime, the advice we're giving importers is continue to do everything you can to preserve your rights for refunds. And that includes if you have open entries, go ahead and file a post summary correction. Now if you have liquidated entries, go ahead and file a protest. If a protest or a post summary correction for some reason are denied, you should be filing at the Court of International Trade and objecting to those decisions. Because there are certain instances where once an entry is closed, the government can avoid a refund. Even if you're technically entitled to it. You need to be very careful to keep all that open. And the one thing I would also, people don't think about it. But given the sheer volume of requests that brokers are going to receive, brokers are going to be incredibly delayed. So it's not going to be a situation where you can go to your broker and expect them to file a post summary correction or a protest the next day. We're hearing already brokers saying they're going to be delayed days, weeks, maybe even months. So you're going to want to factor that into your process for keeping your, your rights preserved and probably try and go to your broker sooner than later and start getting in line to get these things addressed.

B (13:41)

What do you do? If you're, let's say you're listening to this, you're building a, whatever 300 megawatt solar project in wherever, Southwest U.S. and you have not imported anything yet. But you, your contract set up with the typical sharing of paying of tariffs that we've seen because it's based on what had been done for the last couple years. Do you think you could Turn around to your lenders and say, look, these tariffs aren't going to apply anymore and my project costs just went down and my project's more viable. And you think people are going to turn around and go back to their suppliers and say, yeah, this tariff doesn't apply. Let's go back to the pre tariff world. Or I guess, well, maybe that's not even the right way to think of it because we know that there is the 10% tariff that probably applies until that gets challenged.

A (14:34)

Yeah, this, this is going to be chaotic in its own right for the reasons that you're suggesting. I mean, I don't know that lenders are going to be very comfortable in the short term that any economics have changed until they see what's coming down the pipeline, depending on the timing of what, when items are being imported. In dealing with a lot of those supply contracts, a lot of them have embedded sort of these concepts of new tariff events or tariff increases. And oftentimes they're predicated on a baseline tariff of known tariffs at the time the contract was entered into. And what you may have is all these tariffs have gone away. And now, even though the rates might be similar, all of these new tariffs may constitute a new tariff event that would allow for an increase in contract price. You know, you're going to have to look very carefully at those provisions, so

B (15:29)

you're going to be more messy. So it'd be a windfall, theoretically for the equipment supplier, although I don't believe there's going to be some fights over that.

A (15:39)

That's exactly right.

B (15:40)

All right, well, it sounds like this is going to be pretty messy. I don't say pretty. I'd say very messy. And that I'll be on the phone with you daily here for the next few weeks.

A (15:51)

Quite possible. I mean, things are changing by the minute, so we're keeping on top of it for now.

B (15:57)

All right, well, thanks for taking the time to record today, Stefan. Take care.

A (16:01)

Yep, thanks for having me. Bye.

B (16:05)

You can find us online at www.projectfinance.law or send us an email at currentsort rose fulbright.com Please rate, review and subscribe on Apple Podcasts, Spotify or your preferred podcast app. Our show today was produced by Emily Rogers. Stay ahead of the Currents.