What Small Businesses Need to Know

As refund opportunities become available for duties imposed under the International Emergency Economic Powers Act (IEEPA), some companies are approaching importers with offers to “buy” or advance against their refund claims.

These arrangements are often marketed as a way to get cash faster. But for most small businesses, they come with significant downsides—and in many cases, added risk and complexity.

How These Arrangements Typically Work

While structures vary, most fall into one of three categories:

1. Assignment (Sale of Claim)

A third party offers to purchase your refund claim at a discount.

• You receive a lump sum now (often 70–90% of the expected refund)
• The third party seeks to collect the full refund later
• The difference is their profit

2. Advance + Fee Model

You receive an upfront payment, but retain the claim.

• The company advances a portion of your expected refund
• They take a significant fee or percentage when the refund is paid
• Your total recovery is reduced

3. Contingent Purchase

The buyer assumes some risk, but at a steep discount.

• Payment is tied to whether the refund is ultimately recovered
• Discounts are often much larger due to uncertainty

The Claimed “Benefits”

Companies offering these arrangements typically emphasize:

• Immediate cash flow
• Risk transfer
• Administrative support

While these may sound appealing, they often do not reflect how the refund process actually works.

The Reality: Key Risks and Downsides

1. You Are Giving Up Money You Are Owed

These arrangements require you to forfeit a meaningful portion of your refund—often tens of thousands of dollars or more.

For most businesses, this is simply an expensive way to access liquidity.

2. There Is No Faster Path to Payment

Refund timing is driven by:

• Court decisions
• Statutory processes
• Administrative procedures of U.S. Customs and Border Protection

A third party cannot accelerate these timelines. Selling your claim does not make your refund arrive sooner.

3. No Clear Path to Assign Your Claim (Major Risk)

There is currently no clear guidance from CBP explaining how refund claims can be assigned to a third party—or whether such assignments will be recognized at all.

What CBP has made clear:

• Refunds are processed through the Importer of Record (IOR)
• Claims must be submitted through the IOR’s ACE portal account
• Payments are tied to the IOR’s registered account
• Authorized customs brokers may act on behalf of the IOR—but not replace them

CBP has not provided any mechanism for:

• Transferring ownership of a claim
• Substituting a third party as the claimant
• Directing payment to a purchaser of the claim

What this means in practice:
Even if you “sell” your claim, CBP may still only recognize you as the claimant.

4. You May Still Have to Do the Work

Because the system is built around the Importer of Record:

• You may still need to:
  • Maintain your ACE portal account
  • Submit CAPE declarations
  • Provide banking information
  • Respond to CBP inquiries

This means you could give up a portion of your refund and still be responsible for navigating the process.

5. Added Legal and Contract Risk

These arrangements can introduce:

• Uncertainty about whether the assignment is legally effective
• Disputes over entitlement to the refund
• Contractual obligations such as:
  • Representations and warranties
  • Clawbacks or repayment triggers

In short, you may be adding legal complexity to what should be a straightforward recovery.

6. Tax Considerations: Selling your refund claim may not only reduce the total amount you receive—it may also accelerate taxes and create mismatches in how that income is treated. In many cases, businesses end up with less cash than expected after taxes, making these arrangements even more costly than they initially appear. Things to consider and consult your account:

Key Risks

1. Immediate Taxable Income
   The upfront payment you receive may be treated as taxable income in the year you receive it—even though the underlying refund relates to prior tariff payments.
2. Reduced After-Tax Value
   Because these arrangements involve a discount (often 10–30% or more), you may:

• Receive less than the full refund
• Still owe taxes on the amount received

3. Mismatch with Prior Deductions
   Tariffs are typically deducted as business expenses. Selling your claim may:

• Disrupt how that expense and refund align for tax purposes
• Result in income recognition without a clean offset

4. Uncertain Tax Treatment
   Depending on how the arrangement is structured, the payment could be treated as:

• Ordinary income, or
• Gain from the sale of a claim

The treatment is not always straightforward and may vary by situation.

5. Additional State Tax Exposure
   You may also owe state income taxes on the payment, further reducing net proceeds.

Before entering into any agreement, businesses should carefully evaluate the after-tax impact and consult with a qualified tax advisor.

When Might These Arrangements Make Sense?

In limited circumstances, such as:

• Severe and immediate liquidity constraints
• No access to traditional financing
• High uncertainty about recovery

Even then, businesses should proceed with caution and fully understand the terms.

 For most small businesses, selling or assigning a tariff refund claim is unnecessary and economically disadvantageous.

• You are entitled to the full refund
• You are not gaining speed or certainty
• CBP may not recognize the assignment at all
• You may still have to do the work

If you have been approached with an offer to purchase your refund claim, we encourage you to review it carefully and seek guidance before making any decision.