In a striking development across corporate America, businesses are turning potential future tariff refunds into immediate cash through an emerging marketplace for tariff recovery rights. This innovative financial strategy represents a creative response to the lingering impacts of trade wars that have reshaped global commerce since 2018.
Major corporations like Crocs, Roku, and Weber are selling their rights to possible future tariff refunds at pennies on the dollar, creating a secondary market that resembles a sophisticated bet on trade policy outcomes. The practice has gained traction as companies seek to monetize what amounts to lottery tickets on future court decisions regarding the legality of certain Trump-era tariffs.
“Companies are essentially converting uncertain future assets into certain present value,” explains Catherine Schultz, vice president for tax and trade policy at the National Foreign Trade Council. “It’s risk mitigation in its purest form, though at a significant discount.”
The phenomenon stems from ongoing litigation challenging Section 301 tariffs imposed on Chinese imports beginning in 2018. While the legal battles continue through the U.S. Court of International Trade and likely the Supreme Court, thousands of U.S. importers filed “protective claims” to preserve their right to potential refunds should the courts ultimately rule the tariffs unlawful.
According to U.S. Customs and Border Protection data, these contested tariffs have generated over $160 billion in duties. The magnitude of this figure explains why a marketplace for these claims has materialized, with specialized firms stepping in to purchase these rights from companies unwilling to wait years for uncertain outcomes.
Financial documents reveal the scale of these transactions. Weber sold refund rights related to $163 million in tariff payments for just $10.4 million – recovering about 6 cents on the dollar. Similarly, Crocs received $14.5 million for refund rights on $279 million in tariffs, while Roku secured $15 million for claims related to $244 million in duties.
“This represents the financialization of trade policy uncertainty,” notes David Dollar, senior fellow at the Brookings Institution and former Treasury representative in China. “Companies are making rational economic decisions based on the time value of money and their assessment of legal risk.”
The mechanics of these transactions involve specialized firms that have emerged as intermediaries. Companies like KlearView, Diaz Trade Law, and CT Strategies have positioned themselves as buyers of these potential refunds, essentially placing large bets on favorable court outcomes.
For many businesses, selling these rights provides immediate financial relief and balance sheet certainty. CFOs can transform uncertain, contingent assets into guaranteed cash flow – an attractive proposition for companies prioritizing liquidity in a challenging economic environment.
“It’s not unlike how companies might sell their accounts receivable at a discount to improve cash flow,” explains Mark Zandi, chief economist at Moody’s Analytics. “The difference here is that these receivables are contingent on court decisions rather than customer payments.”
The buyers of these rights are making complex calculations involving the probability of successful litigation, the timeline for resolution, and the likely scale of any refunds. Their business model hinges on acquiring sufficient volume of these rights to create a diversified portfolio where even partial legal victories could generate substantial returns.
Industry experts estimate that the market for these refund rights has already reached several billion dollars in transaction value. The practice has flourished because of the specific circumstances created by the trade disputes – a massive volume of contested tariffs, thousands of protective claims, and prolonged legal uncertainty.
The trade disputes themselves remain contentious. Proponents of the tariffs argue they were necessary to combat China’s unfair trade practices and protect American industries. Critics contend they functioned primarily as taxes on American businesses and consumers while failing to achieve meaningful policy objectives.
Data from the Federal Reserve Bank of New York and other economic researchers suggest that American importers bore approximately 92% of the cost of the tariffs, contradicting claims that Chinese exporters were paying these duties. This economic reality helps explain the eagerness of U.S. companies to recover any portion of these costs.
The legal arguments focus on whether the tariff implementation followed proper procedures under trade law. Plaintiffs argue that the expansion of tariffs beyond the initial set of goods exceeded the administration’s authority under Section 301 of the Trade Act of 1974.
Looking ahead, the outcome remains uncertain. In April 2024, a three-judge panel at the Court of International Trade ruled in favor of the government, but plaintiffs have appealed. Legal experts anticipate the case will ultimately reach the Supreme Court, with potential decisions not expected before 2025 at the earliest.
For companies selling their refund rights, the calculus is straightforward. “Birds in hand are worth more than those in the bush, especially when the bush might be barren,” remarks one trade attorney involved in several such transactions. “Getting 5-10% now versus possibly getting 100% in five years – or nothing at all – is an easy decision for many CFOs.”
The emergence of this marketplace highlights the far-reaching economic consequences of trade policies and the financial innovation that uncertainty often spawns. As litigation proceeds and the market for these rights matures, it represents yet another chapter in how global trade tensions continue to reshape business strategies and financial markets in unexpected ways.
