Geoff Bennett:
Among the many uncertainties clouding the U.S. economic picture are tariffs, both the prospect of new ones and upcoming refunds from recent tariffs deemed illegal. And there are a number of questions for businesses and consumers alike.
Our Stephanie Sy has more.
Stephanie Sy:
In February, the Supreme Court struck down the sweeping tariffs imposed by President Trump under the International Emergency Economic Powers Act. Now businesses are scrambling to get their money back.
Last week, U.S. Customs and Border Protection started accepting refund claims for $166 billion in tariffs collected over the past year, including from companies such as Basic Fun!, which sells toys familiar to many of us Tonka trucks, Care Bears and Lite-Brite
The CEO, Jay Foreman, joins me now.
Jay, great to have you back on the “News Hour.”
So, how much money are you owed? And tell us what the process has been like to claim the refund.
Jay Foreman, CEO, Basic Fun!:
Sure.
Well, if all goes well, we have got $7.4 million coming back to us, which we will use to reinvest in our business and our employees. So far, I have to say the process has been smooth. The CBP set up the portal. The portal operated pretty well. Couple glitches here and there last Monday when we were able to start loading everything in, but we have got all our invoices and claims loaded.
And all we’re doing is waiting for the magic day when they push the button and actually the money starts to flow back in the form of refunds. That’s — at this point, that’s what we’re waiting for. Everything else is locked and loaded.
Stephanie Sy:
Do you have any idea when that button is going to get pushed? And how does it come out? Is it just all in one lump sum?
Jay Foreman:
We believe that somewhere in the next 45 to 60 days, maybe 90 days at most, but we haven’t been told. There’s no posting on the portal that tells you when to expect those refunds to come in. And we’re really not sure whether they’re going to come in, it’s all going to come in one shot or it’s going to sort of dribble in invoice by invoice.
So we have got 560 individual import invoices logged in to the computer. We’re hoping that it’s going to come back in one lump sum, but we really have no idea right now. We’re just sort of sitting and waiting.
Stephanie Sy:
Well, I know that your business basically sells toys to the major retailers, who then sell to customers, right? Some of those retailers, as you know, passed on surcharges to customers. You said that you’re planning to invest these millions back into the business. Will customers ever reap any benefit from the tariff refunds?
Jay Foreman:
I think, in some ways, they will.
Major retailers that were in the position that they had to pass along refunds, if they decide to take the refund — or they had to pass on tariffs. If they decide to take the refund, they have got a lot of opportunities to sort of provide deals and get money back to consumers in a lot of different ways, whether that’s discounting products or giving folks credits.
The challenge more is with smaller, medium-sized companies that weren’t able to pass those costs along. For us, it just came right off the bottom line. So our plan is really to reinvest this in our business, to pay down some debt, invest in some new equipment, invest in our employees.
So I think the most important thing is, when this money is returned, it will be invested back into the economy in some ways through pricing to consumers and they will see it. In other ways, it will go back to companies that can return it to shareholders or reinvest it in their business.
It’s not quite like shooting a missile off that explodes and not only do you never see that money again, but you have to replace that missile. When that money comes back into the economy and into the folks that pay the tariffs, it’s going to be reinvested into this country.
And you will see an economic boom to the tune of $160 billion or more coming back into the market here.
Stephanie Sy:
Were there any losses or business impacts that the refund can’t make up for?
Jay Foreman:
Yes, I will give you a perfect example.
We purchased the assets of a great company called Arcade1Up. It’s a company that makes sort of Pac-Man and video game machines that you can put in your home game room. And they got hit super hard not only by the tariffs, but even before the tariffs, by the supply chain crisis and the cost of freight and transportation and the gyrations in the market around COVID.
And in the end, it was the tariffs that really put the nail in the coffin for them and they weren’t able to make it. And so we were able to purchase the assets of the company, keep a number of the employees employed and bring that product line back to the market. And there are dozens, if not hundreds of companies in the same situation.
People, small businesses, I like to call them the sort of “Shark Tank” generation, where people that have created basements in their homes and in their garages that are using their own money and their savings to create businesses that don’t have leverage to pass those costs along, those folks really suffered.
And that money needs to come back to them and I’m sure they will be reinvesting all that money back into their lives, into their businesses and a lot of them just to repay debt that they might have taken on in order to finance their businesses and support the payment of these tariffs.
Stephanie Sy:
Jay, are you confident that there won’t be any more tariffs in the future? I mean, do you have to plan your business for the eventuality that they could come back?
Jay Foreman:
Since COVID and the supply chain crisis and this whole tariff situation, we’re always planning for a worst-case scenario.
Right now, tariffs are 10 percent, which are workable. There are cases going through the courts right now to try to strike those 10 percent tariffs down. The administration is talking about imposing a different regiment of tariffs, 301 tariffs.
So we have to assume that this administration is still looking in some form to place tariffs. Whether they stay on industries like the toy business or the government focuses on really strategic industries, that’s left to be determined.
But we have to continue to sort of have a chaos mentality that, whether it’s the administration doing things that are upsetting the market or the world doing things that are upsetting the market, that’s the business environment many of us are in right now. And we just have to hunker down and hope for the best and prepare for the worst.
Stephanie Sy:
That is Jay Foreman, CEO of the toy company Basic Fun!, joining us.
Thank you, Jay.
Jay Foreman:
Thank you.
