Pankaj Raval (00:03)
Hey, everyone, and welcome back to Letters of Intent, the show where we talk about the legal, the macro, and the business shifts that keep entrepreneurs awake at night and investors checking their phones at 3 AM. I’m your host, Pankaj Raval founder of Carbon Law Group.

Sahil (00:15)
And I’m Sahil Chaudry, corporate attorney and perpetual watcher of the geopolitical soap opera we now call the US economy. And today, ⁓ man, bunkage, today we’ve got a good one.

Pankaj Raval (00:26)
I’m excited for this one, you know, because this is extremely timely. You know, we scrapped the last episode that we were going to talk about just because of the big news that came out today and it do something with our favorite hot dog.

Sahil (00:37)
That’s right. And for me, my favorite veggie dogs, we’re talking about Costco. Yes, Costco, the bulk buying dollar 50 hot dog selling giant, the place you go to if you’re an Indian American religiously, that place is suing the Trump administration over tariffs. And it’s not just a policy disagreement. They’re saying the White House exceeded its emergency authority under the International Emergency Economic Powers Act.

Pankaj Raval (00:40)
Exactly.

You’re right, yeah, and it sounds like a big company problem, know, it sounds like a Fortune 500 company problem, but reality it’s not. know, whatever’s happening, you know, on Wall Street also affects Main Street, and tariffs affect small businesses just as much as big businesses, and if you have a small business dealing with goods or products that you’re importing from overseas, you’re gonna wanna pay attention because it’s some really important insights on what you need to do and take timely action, because if you don’t act now, which is why Costco filed this lawsuit,

then you’re gonna be potentially stuck paying all these tariffs when potentially you could get that money back. So you’re gonna wanna listen to this episode. We have a lot of really important insight we wanna share with all of you that could really help your business.

Sahil (01:42)
That’s exactly right. We have a number of clients who are importers of goods and this is very important. This is a way to preserve your rights dealing with this tariff uncertainty. So here’s what’s going on. Costco is basically saying, look, President Trump, you can’t just use emergency powers to slap tariffs on everything under the sun.

IEEPA allows presidents to act fast during a true national emergency. But the statute doesn’t mention tariffs at all. And Costco is making three big claims. Number one, there was no.

Pankaj Raval (02:11)
And also,

I just wanted to interject there, Sal, before you get into the claims. And it’s also important that people understand that the whole foundation of this dispute also is really about the separation of powers, which is what we’ve been dealing with from the start of this administration. And every administration, I’m sure, deals with this. But we’ve seen it really come to light here because fundamentally, Congress is the only branch of the government that has the authority to tax. And that’s what people need to keep in mind here. This is also why we have such a big issue

Sahil (02:14)
Yeah.

Pankaj Raval (02:39)
with these tariffs. Trump has come out in huge support of tariffs since he ever entered the national stage and before that, but the reality is presidents don’t have that power to tax and I think that’s a crux of this issue as well. So go ahead, Sal.

Sahil (02:51)
No,

that’s exactly right. mean, basically we’re talking about an overreach of executive authority. That’s what Costco is claiming. like Costco is saying, well, if you’re going to reach into this emergency power, you need to demonstrate there’s a true emergency and this has to be rooted in law. So number one, Costco is claiming there was no unusual and extraordinary threat that justified invoking emergency authority.

Number two, even if emergency powers applied, IEEPA doesn’t give president power to impose taxes and tariffs like you just mentioned are taxes. Number three, Supreme Court seems to agree even though we don’t have a ruling yet. Chief Justice Roberts has flat out said taxation is Congress’s job.

Pankaj Raval (03:33)
Absolutely. And this matters because even if the Supreme Court eventually says that the tariffs are unconstitutional, which it hasn’t really ruled yet, we’ve had some insight into it during oral arguments where surprisingly a lot of the justices, even those appointed by Trump, were very, know…

questioning the authority of the Trump administration to enact these tariffs, which gives us potentially some insight how they’re going to rule, with a lot of people saying they will say that it is unconstitutional. There’s still an issue that what happens to the money that’s been paid? And will these businesses that have paid these massive tariffs in some situation like Costco get their money back? And that’s why Costco is bringing this lawsuit.

Sahil (04:10)
That’s exactly right because there are time limits here that prevent you from claiming a refund. There’s this thing called liquidation. So if you’re an importer and you are receiving goods, you’re familiar with customs. So customs finalizes tariff amounts roughly 314 days after goods enter the U.S. If that deadline passes before you challenge the tariff, the money is gone, even if the tariff gets struck down later.

Pankaj Raval (04:37)
That’s like being told you’re overcharged for your meal, but the restaurant already closed. So, good luck.

Sahil (04:42)
Exactly. And in this case, that meal is costing you hundreds of millions of dollars.

Pankaj Raval (04:46)
Yes, I would not be too pleased with that. Definitely would take to their Yelp page for sure.

Sahil (04:51)
Exactly. We want to Yelp

government agency here because this is, you know, if you are being overcharged for something, this is effectively erasing the margin of a lot of companies right now who are just trying to stay afloat with a sliver of a margin. And so if they’re able to get this refund, this could bring a lot of small businesses roaring back.

Pankaj Raval (05:14)
Yes, absolutely. So let’s connect the dots here. Costco’s problems are massive in scale, but listening, if you’re importing or exporting, you know, if you have a that sells products most likely, and most of them are manufactured overseas nowadays, let’s be real, they’re probably thinking, if Costco’s struggling to get refunds, what chance do I have?

Sahil (05:34)
That’s right, every small business feels like it’s futile, but tariffs aren’t just political talking points. They’re essentially taxes on small businesses who rely on imports to stay competitive. When federal tariff collections go from $7 billion a month to $30 billion, that’s not a macroeconomic abstraction. That’s a margin killer. And that’s what we’ve been seeing with a lot of our clients who are dealing with these tariffs.

Pankaj Raval (05:56)
Absolutely. So small businesses don’t have Costco’s legal war chest. They can’t drop a million dollars on litigation just to preserve their rights. So mean, what are their options? they stuck?

Sahil (06:06)
Yeah, exactly. And they can’t float the cash for a year while waiting for the Supreme Court to make a decision. Most small businesses that are operating, they’re operating on 60 to 90 day cash cycles. You’ve got to pay your factory and then you’re holding the bag waiting for your customer to pay you as well. A sudden 20 % increase. I mean, with Indian goods right now, with an apparel, you’re talking about upwards of 67%. That can vaporize your entire pricing model. Yeah.

Pankaj Raval (06:22)
Yeah.

Yeah, I mean, Sahil, this is something you’ve experienced firsthand,

right? Over the years, I mean,

Sahil (06:35)
Absolutely,

business is in the garment industry and importing apparel and we’ve seen this be a total margin killer. It’s very difficult and for a number of families who are importing, whether that’s jewelry, apparel, there are any number of case goods like furniture, there are all kinds of products that will fall under these tariffs and…

even if you’re moving, let’s say, from a high tariff country like India to a lower one, like Vietnam, you’re still dealing with this tariff. when you’re importing goods and you’re competing in the global economy, margins get very thin. And so this is a very dangerous time for many small businesses.

Pankaj Raval (07:09)
Mm-hmm.

Absolutely.

Sahil (07:15)
if you’re importing anything Products packaging raw materials you cannot assume tariffs are temporary or refundable You have to pay real cash right now to pay for your goods and you have to also write the check for the tariff

So what we are advising for our clients is you need to preserve your refund rights. And now that is a strategic business function that is going to amount to a very large percentage of your revenue.

Pankaj Raval (07:40)
Absolutely. Very good insight to keep in mind for all these living in these kind precarious times with a lot of uncertainty. So zooming out, when governments weaponize tariffs like this, does that mean for entrepreneurial risk taking?

Sahil (07:52)
Well, it injects uncertainty into everything. Entrepreneurs can accept a risk, but they can accept a risk that’s measurable. Uncertainty, that becomes very chaotic. You can’t price uncertainty. You can’t insure against it and you can’t model it. So when you’re trying to calculate your that basically freezes a lot of businesses and many of our clients as well would rather do nothing and wait than take on orders where they’re losing money.

Pankaj Raval (08:17)
Yeah, I mean, for me, I think it has a chilling effect, right? It definitely has a chilling effect on economic transaction, any kind of transactions, right? If there’s uncertainty as we’re seeing, for example, in the, maybe the housing market with uncertainty on interest prices, right? If interest rates are higher, people are maybe gonna be sitting on the sidelines a little bit longer before they buy. I think we’re seeing that with the tariffs. There’s certain people to not invest maybe,

Sahil (08:21)
Yes, exactly.

Pankaj Raval (08:41)
you’re

trying to bring investment back to the US, but if people don’t know what’s gonna happen, why would they take such a big risk? And I think that’s something that really has been the cornerstone and the backbone of the US economy of why we’ve been so successful is because we’ve been able to de-risk many different trades in many different areas, industries, right? So this is essentially creating a lot of chaos there.

Sahil (09:04)
Yeah,

I mean, our supply chain model is loosely based on the idea of comparative advantage, that every country has something that their resources and their talent pool makes them more competitive at. And so the issue that we’re having is you are going to see number of businesses that are importing goods from other countries that have a comparative advantage in those resources. You’re going to see them freeze.

And we’re not going to have a replacement for those products without them becoming very expensive because we don’t have the infrastructure to manufacture those goods yet. And to build that manufacturing ecosystem will take a very long time. So we’re really dealing with, you know, we’re dealing with a legal issue, we’re dealing with a business issue, we’re dealing with a political issue. And so I think this lawsuit by Costco is very timely. actually think that most importers

Pankaj Raval (09:38)
Right.

Sahil (09:54)
are less interested in a specific outcome here from the court. They’re more interested in an outcome. Business can adapt to new environments and new paradigm shifts and entrepreneurs are very flexible and adaptive and will find ways to make their supply chains work. But not if the rules aren’t clear. That becomes very, very challenging. And right now you have importers who have containers sitting in Long Beach

accruing storage fees while they’re waiting to scramble and reprice their entire supply chain.

Pankaj Raval (10:25)
Right, absolutely. You know, I think there’s definitely something missing here in terms of economic analysis when it comes to comparative advantage that Trump I think seems to overlook is that every country, according to economic theory that has been rigorously tested, should be producing what it does best, be US does not have a comparative advantage when it comes to labor. That’s just the bottom line.

Sahil (10:42)
Exactly.

Right.

Pankaj Raval (10:47)
So,

you know, Trump is trying to make something out of nothing and really trying to force the to act in a way that just doesn’t apply. know, his thinking maybe was applicable 50 to 70 years ago, but not today. And I think that’s something that, you unfortunately is causing a lot of problems in the economy and his policy.

Sahil (11:07)
The issue is it’s not just a matter of price, it’s also a matter of expertise. So if you have built an economy that has an expertise in designing apparel or iPhones or jeans, you have built the natural resources to support that and the talent pool that knows how to do it. To just train people to do things well, it’s not simply a matter of cost reduction, it’s also a matter of replacing the expertise. You have some goods,

I

I’ll give an example, European brands have been importing beaded dresses from India for centuries. And that’s because there are artisans in India who specialize in that kind of work. And the same can be said for a number of other products that we import. There is often a reason that we’re importing from other countries and it’s because we’re also leveraging that country’s expertise and

and that also brings the cost down to a more competitive place and that benefits the consumers in the US. So here’s, I want to kind of get into practically what small businesses…

should do and how to preserve the refund rights. So we’re going to give you, this is Carbon Law Group’s practical playbook for preserving your rights. This is what Costco is doing and what small and mid-sized businesses must do if they want any hope of getting tariff refunds later. Number one, track liquidation deadlines. Liquidation is the clock that kills refund rights. Now liquidation means the date, 314 days approximately after which

Pankaj Raval (12:11)
Yeah. Yeah.

Sahil (12:37)
Your goods have come into the United States. That’s what’s called liquidation. It’s not the same term as when you have a sale or you’re realizing a gain. This is a very custom specific term. If you miss the 314 day window, your duties become final. Even if the tariff is later ruled illegal, this is what we mean by liquidation. Small businesses should maintain a liquidation calendar for all imports. Number two, you need to file a protest, which is customs form 19.

If your entry has liquidated, you have 180 days to challenge it. A protest has to say, customs applied the tariff wrong, you need to give me my money back. But protests cannot revive entries that liquidated months or years ago. So you have 180 days from the date of liquidation in order to challenge it. Number three.

File a CIT lawsuit to stop liquidation. This is what Costco did. It’s a lawsuit in the court of international trade, which can suspend liquidation preserve all refund rights, and allow you to benefit from any ruling that would strike down the tariff. Now, keeping it real, this is expensive, but there are me too lawsuits for small businesses that dramatically reduce costs. You can join in on a larger parties’ lawsuit. Number four.

You can request an extension of liquidation. If you’re not ready to litigate, you can ask customs to delay liquidation. This buys you time while tariff cases work their way through the courts. And number five, you need to communicate tariff volatility to your customers. If your costs may swing 10 to 25 % based on federal policy, that’s something your customers need to understand early, not after you’re forced to raise prices.

Pankaj Raval (14:10)
so Sahil, the message is that you don’t get refunds by default. If the Supreme Court says this is unconstitutional, the government’s not just gonna send you that money back. Is that right?

Sahil (14:19)
That’s exactly right. Costco’s fighting because once liquidation happens, even a Supreme Court win doesn’t guarantee refunds. Small businesses need to fight. Yes.

Pankaj Raval (14:26)
So you’ve got to preserve your rights. Correct? You’ve to preserve your

rights before liquidation, meaning you’ve got to file this claim the customers.

Sahil (14:34)
That’s right. And I would say it’s less realistic for a small business to file a court of international trade lawsuit, but it is very realistic for you to file a protest, which is called a customs form 19. And that’s a way for you to preserve your rights. If your entry has liquidated, you have 180 days to challenge it and you need to file that challenge. And this is a concept we see often in law and we want to impress upon our clients.

and the people listening, is preserving your rights. In US law, there are many instances where you need to exercise your rights in order to protect them. This occurs when it comes to intellectual property. This occurs with real estate. occurs with contracts. So you want to make sure when you’re a business owner in the US, you know when you need to fight. And this is one of those examples.

Okay, so where I was going with that bunkage was I was gonna say this is a concept we see often in law when it comes to IP, real estate, contracts, is preserving your rights by exercising them.

Pankaj Raval (15:29)
Okay.

Sahil (15:31)
Here’s the irony. Tariffs are marketed as protection for American businesses, but unless you’re a massive domestic manufacturer, they usually hurt you instead.

Pankaj Raval (15:40)
Okay, so Costco suing isn’t just a corporate tantrum, it’s a flare When the biggest retailers on the planet say, the rules make no sense, small businesses definitely need to pay attention.

Sahil (15:49)
Yeah, and regardless of your political stance, this lawsuit could define how future presidents use emergency powers. The fallout affects every importer, every factory relationship, every supply chain decision.

Pankaj Raval (16:01)
Absolutely. here’s the thing, whatever is happening in the toxic world of politics, you know, and it’s become a lot of people don’t want to engage because it is emotionally draining. But the unfortunate reality is that if you don’t engage, if you don’t stay on top of these things, it’s going to affect your business. And these policies have a business impact and they will affect your P &L if you’re not up to date and stay.

in the know about what’s going on.

Sahil (16:25)
Yeah, that’s exactly right. mean, you’re talking about Costco. This should be a big, bright set of shining lights to every small to mid-sized business that if Costco is filing a lawsuit, taking this risk, it’s a political risk. That means there’s a lot of money at stake because we’ve seen CEOs line up behind President Trump looking to court him and trying not to make him upset.

If in this case, Costco is launching a full blown lawsuit, we’re talking about a huge amount of refunds that Costco is demanding. And Costco is not a small player. Yeah. You’re talking about billions of dollars. Exactly. So.

Pankaj Raval (16:58)
billions and billions of dollars that’s going to be going back to businesses.

Sahil (17:04)
Costco is not a small company. Costco is a major player. They’ve got political power. They’ve got economic power. And so if they’re willing to challenge the president at a time when the president can be quite vindictive, that means there’s something here. They’ve got a shot at winning. And every small to mid-sized business needs to pay attention to what they’re doing and apply their macro strategy to their business.

Pankaj Raval (17:27)
Absolutely, Yeah, and I think that’s a great way to end this, a great place to end this, because if you’re a retailer, matter the size, this is relevant to you, and you need to make sure that you are taking the action to preserve your rights to the refunds if they do happen, and not lose out on that window. Because it’s one thing we know about Trump, he doesn’t like to part with money, and I don’t think he’s gonna give

businesses. But if he does, know, he’s probably going to say, oh, look at the investment or look at the financial, you know, stimulus that I provided to all these businesses.

they were paying in the first place. regardless of whatever the politics are, trying to make this apolitical. here to protect businesses. We’re here to fight for businesses. We’re here to represent businesses. And ideally, you’ll keep them out of the trouble in the first place. So with that said, please pay attention to what’s going on. If you have paid a tariff, make sure you’re taking the necessary steps to protect your right to refund by filing with

Customs of Border Protection, as well as potentially filing a lawsuit with the International Trade Commission because that’s the only way you’re really truly going to preserve your rights.

Do what these big box retailers are doing. Do what these people with lots of money are doing. Follow their suit because they’ve spent lots of time and money and millions of dollars on lawyers to analyze this. So they probably know they’re doing when it comes to protecting their interests and the rights to the money and the revenues they’ve earned.

Sahil (18:43)
That’s right. We are all in favor of you taking risks and making bold moves and making bold deals. That’s what we’re here for. We just want to make sure you’re equipped for the battle. That’s it for today’s episode of Letters of Intent. I’m Sahil Chaudry.

Pankaj Raval (18:58)
And I’m Pankaj Raval. Thank you guys again. Thank you for listening. Please like, share, subscribe. For more content like this, leave a comment, ask questions. We’d love to hear from our listeners and we’re gonna continue to produce more content like this in the future that hopefully is relevant to your business and helping you grow and succeed.

All right, thank you.

Sahil (19:15)
All right.