For the past eight years, Stamford, Connecticut-based furniture company Lovesac has been transforming its supply chain.\u00a0<\/p>\n
Following the introduction of tariffs during President Donald Trump\u2019s first administration, Lovesac CEO Shawn Nelson<\/a> made the decision to move some of its manufacturing from the mainland to\u00a0Vietnam, Indonesia, and Malaysia. After a raft of tariffs to begin Trump\u2019s second term, Nelson not only felt validated in his decision to diversify the supply chain; he doubled down on the idea, moving more production to the U.S.<\/p>\n \u201cWe have the intention to be manufacturing our core products in America by mid-next year, and have the bulk of our production happening in America by the very end of next fiscal year,\u201d Nelson told Fortune. \u201cIf that\u2019s truly what Trump wanted, then I guess it worked on us.\u201d<\/p>\n Nelson may have guessed correctly on the president digging his heels into tariffs seven years on from his first term, but the taxes may not be around for much longer. Next month, the Supreme Court will begin hearing arguments<\/a> on the legality of the levies imposed under the International Emergency Economic Powers Act. If the court upholds lower courts\u2019 decisions that the tariffs are illegal, the tens of billions in tariff revenue may be refunded to American companies. Treasury Secretary Scott Bessent said those refunds could be between $750 billion and an eye-popping $1 trillion<\/a>.<\/p>\n Even for Lovesac, with its domestic supply chain push, the refund has appeal. Tariffs have impacted the company\u2019s gross margins, according to its recent earnings report<\/a>. Lovesac raised its price twice in the last year.<\/p>\n \u201cI mean, I\u2019ll take it,\u201d Nelson said of the potential refunds. \u201cFor us, it\u2019s tens of millions of dollars. So that would be neat.\u201d<\/p>\n But the reality of pursuing these refunds\u2014should the Supreme Court even rule against the tariffs\u2014is confounding, complicating whether it\u2019s even worth the effort of recouping the lost cash. For some companies, the effort may be worth it. For others, it may still be worth it\u2014but it will also be a total pain.<\/p>\n \u201cThe general feeling is, if you have the resources, and you have the capability, the juice is worth the squeeze,\u201d David Warrick, executive vice president of supply-chain risk management firm Overhaul, told Fortune. \u201cIf you are a smaller business or a smaller importer, you\u2019ve already spent time baking in the cost of tariffs and the associated risks to your supply chain, then you\u2019ve got to weigh up that cost-benefit.\u201d<\/p>\n The complexities of pursuing refunds<\/p>\n Asking companies to even consider the possibility of refunds is a tall order, given the lack of information on what the refund process would look like, even with the Supreme Court hearing the case on tariffs in a matter of weeks.<\/p>\n Lawyers have speculated that in order<\/a> for companies to receive tariffs, they may have to go through an application process with the U.S. Customers and Border Protection (CBP)\u2014which routinely issues checks to companies who overpay for tariffs\u2014or each firm may have to file their own court case. It\u2019s unlikely the government will offer automatic refunds.<\/p>\n \u201cWe\u2019re not even sure how [CBP] will actually be able to manage these tariffs,\u201d Warrick said.<\/p>\n Henrybuilt, a luxury home manufacture with a mostly domestic supply chain, is one of the companies brushing off the idea of refunds, even as it continues sourcing materials from tariff-struck Austria.\u00a0<\/p>\n \u201cThat might make total sense if it\u2019s a big number,\u201d CEO Scott Hudson said. \u201cI doubt it would be a big number for us, so it\u2019s probably not worth chasing.\u201d<\/p>\n Hudson said the housing and furniture industries are more concerned with the lasting impact of the levies on the cost of home construction. About 7% of goods<\/a> in new home construction, worth $14 billion, came from foreign countries, according to the National Association of Home Builders.<\/p>\n Still, there\u2019s precedent for companies taking advantage of tariff refunds. The U.S. Trade Representative (USTR) announced in March 2022<\/a> it would reinstate hundreds of product exclusions that were subject to Section 301 tariffs, which had expired at the time. The estimated value of the refunds was about $1 billion<\/a>, a fraction of the current potential payback.\u00a0<\/p>\n Above all, Warrick said, timing remains the biggest variable in determining when and how companies can begin the refunding process.<\/p>\n \u201cNobody knows how long this process will take,\u201d he said. \u201cAnd no matter what the initial outcome will be, rest assured, it will be appealed on both sides. So I don\u2019t think that we\u2019re going to see a short term outcome on this.\u201d<\/p>\n What makes the refunds worth it?<\/p>\n While the refund process remains a mystery, that hasn\u2019t stopped some refinancing companies from entering the fold, seeing an opportunity to make cash off of companies not wanting to deal with a headache of a refund process, Warrick said. Liquidation specialists are speculating the refunds will happen and buying the rights to them, offering businesses about 20% of total tariffs paid in exchange for the rights to any future refunds.<\/p>\n \u201cSpeculators are stepping in, saying, why would you want to deal with all of that yourself?\u201d Warrick said. \u201cAnd if you\u2019re a small, medium enterprise who\u2019s already gone through the pain of having to pay the tariffs and you don\u2019t want to change your processes, that might sound like a very attractive proposal.\u201d<\/p>\n At this point, having navigated more than six months of whipsaw tariff policies, the question of the tariffs\u2019 legality is irrelevant for some businesses. For Lovesac, the overhaul in its supply chain over the past decade presented growing pains, but the tariffs were really an opportunity to develop American manufacturing, a goal CEO Nelson had from the company\u2019s inception. It essentially doesn\u2019t matter for some firms if the refund process is a black box\u2014or a complete fantasy\u2014because they have made long-term adjustments to their businesses to account for the export taxes, whether they see those changes as a sunk cost or as future-proofing.<\/p>\n \u201cEven if there was a refund, and then the tariffs go away\u2014all the tariffs go away\u2014it won\u2019t change my point of view on what we\u2019re going to do,\u201d Nelson said.<\/p>\n \u201cI would love it,\u201d he concluded. \u201cBut I don\u2019t expect it.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"For the past eight years, Stamford, Connecticut-based furniture company Lovesac has been transforming its supply chain.\u00a0 Following the…\n","protected":false},"author":2,"featured_media":246422,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,12,101,134789,15304,5948],"class_list":["post-246421","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-donald-trump","tag-economy","tag-home-construction","tag-supreme-court","tag-tariffs-and-trade"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/246421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=246421"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/246421\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/246422"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=246421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=246421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=246421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}