Fashion brands are selling claims for refunds on billions in US import tariffs to hedge funds at discounts of around 20%, seeking immediate cash amid delays. US Customs and Border Protection plans to start processing refunds in early June via its CAPE system. The market emerged after the Supreme Court struck down the tariffs in February.
Since the Supreme Court invalidated President Donald Trump’s International Emergency Economic Powers Act (IEEPA) tariffs in February, importers including fashion brands have awaited refunds on an estimated $166 billion in duties paid. A secondary market has formed where hedge funds such as King Street Capital and Oppenheimer purchase these claims at discounts, offering liquidity now rather than uncertain future payments from the government. Prices have risen from 15 cents on the dollar last fall to about 80 cents today, tracking legal progress, with one ongoing deal involving an $80 million claim sold for roughly $63.2 million. Publicly traded companies have largely avoided sales due to disclosure concerns, though some private brands like Untuckit have fielded offers, according to co-founder Aaron Sanandres. “It’s always interesting to see where the market is valuing these receivables, as it hints at the market’s expected timing to collect,” Sanandres said. Untuckit has not finalized any deal. On March 31, Brandon Lord, executive director of trade programs at US Customs and Border Protection (CBP), confirmed in a US Court of International Trade filing that the CAPE system is 85% complete for claims and poised to issue refunds by early June for Phase 1, covering 63% of roughly 53 million entries. Processing will take 45 days after declaration, with protests and other entries deferred. “No one really knows what the process for refunds looks like, or how long it will take, or if it will even actually happen,” said Neil Saunders, managing director of retail at GlobalData. The fashion sector's familiarity with factoring receivables has made it receptive, experts note. Steve Lamar, president and CEO of the American Apparel & Footwear Association, urged full, quick refunds, adding that the government handles larger taxpayer refunds efficiently. Class-action lawsuits now target brands like Costco for allegedly passing tariff costs to consumers, potentially complicating matters if refunds arrive.
