00:00Section 122 was imposed about five hours after the president lost his IEPA tariff case.
00:06Section 122 says the president does have the authority to grant up to 15% tariffs on pretty much any
00:15country in the world
00:15if there is a large and serious balance of payments deficit.
00:20He has that authority for 150 days, and then Congress has to step in and either renew those tariffs or
00:26they go away.
00:27So our case held that he didn't have a balance of payments, large and serious deficit,
00:34and he was not authorized in this instance to use Section 122.
00:39The court came back. They agreed with us.
00:42They granted motion for summary judgment to our plaintiffs and the state of Washington,
00:46and they also issued a permanent injunction.
00:50What that means is the tariffs stop for our clients.
00:53They still continue for everybody else, but effectively, like what happened in the IEPA case,
01:01if we'd won a universal injunction, the government would have also applied to have immediate set aside of that injunction,
01:09an immediate stay, and the tariffs would have continued just like they did in IEPA.
01:13So we're still kind of in the same world.
01:15They just chose to do it a little bit differently.
01:17Unfortunately, the government did appeal on the following day after the opinion came out,
01:22and so we're waiting to hear from the federal circuit when our case will be heard.
01:27Ethan and Ori, I want to go to you.
01:29Talk to us about what these tariffs have meant for your business,
01:32and this decision meant that you don't have to pay, but as we were just talking about,
01:37that doesn't mean other small businesses aren't still tangled up in this web.
01:40Ethan, why don't you kick us off, and then Ori, we can go over to you.
01:43Yeah, thanks for having us.
01:45Ori and I are the co-founders and co-CEOs of Burlap and Barrel.
01:48We're a single-origin spice company, a direct importer of spices from all around the world.
01:53We're a very small company.
01:54We really grew up during COVID, so navigating all of this has been quite challenging.
02:00We were incredibly gratified and thrilled to see that we won the case.
02:05I mean, huge kudos to Sarah and Jeffrey Schwab and the Liberty Justice Center for a very well-argued case.
02:13You know, it's kind of amazing to us that a very small company like ours can sue the government
02:19over what turns out to be an illegal policy and actually win.
02:24The tariffs have had a pretty significant impact on our business over the past year,
02:28a couple hundred thousand dollars paid out under the IEPA tariffs, plus additional tariffs under Section 122.
02:34So it's been a challenging situation to navigate overall, but we're thrilled to be in this position.
02:41Ori, do you think you're going to get that money back?
02:45Yeah, this was a really big victory for us as small entrepreneurs, as social entrepreneurs, too.
02:52This was a really big win with invalidating these tariffs for us and creating a kind of narrower exemption than
02:57we would have liked.
02:57This is the beginning that's the crack in the dam that's going to take the tariffs overall down, we believe.
03:03And this is also the beginning of us being able to get this money back, but we're going to keep
03:06pushing.
03:07This never was a case just for burlap and barrel.
03:09This was always about invalidating this overreach tariffs in order to support not just us,
03:15but the rest of the small businesses across America.
03:17Ethan, walk us through your decision to file this suit to push back against these tariffs for you to get
03:23hooked up with the Liberty Justice Center.
03:25I imagine there are many hundreds, many thousands of small businesses who have been under the same pressures that you've
03:30been under.
03:30Why did you decide to take the step of fighting this in court?
03:34Yeah, it's a great question.
03:35We are a social enterprise, a public benefit corporation.
03:39So social impact, positive social impact has always been at the heart of what we do from working with small
03:44farms around the world to now pursuing this lawsuit.
03:47We've been following the AIPA case over the past year quite closely.
03:51We filed an amicus brief.
03:53So we've been in touch with Liberty Justice through that period.
03:56But ultimately, the decision to file this suit was a quick one.
04:02We had a couple of days essentially to make a decision.
04:04I was stranded in India because of bombing in Iran.
04:08You know, it was just sort of a difficult moment to make a big decision.
04:12But we were really excited to pursue it.
04:16You know, it wasn't a hard decision, even though we had to make it quickly, because we knew that this
04:20is the right thing to do.
04:22And as you said, there are hundreds, if not hundreds of thousands of importers across the country.
04:28And where are the big corporations?
04:29You know, we're a tiny little company, just to emphasize.
04:32You know, we're an e-commerce retailer.
04:33We sell through our website.
04:34We're not a big spice importer, even in our own world, let alone, you know, compared to other big importers
04:39of other products.
04:41Where were all of the big corporations who had the budget, had the resources to push back against this policy?
04:46The only lawsuits that they filed were for their own refunds, you know, purely self-interested.
04:51And as I already mentioned, we're really doing this to support small businesses in particular across the country.
04:58We felt like somebody had to stand up.
05:00And for various reasons, we were excited to be the ones to do that.
05:05I want to ask you about your product, because, I mean, spices are the OG international trade going back millennia,
05:12right?
05:12This is what started international commerce and trade routes and kind of shaped the world we're in now.
05:17Part of this tariff is the president trying to get people to manufacture products in America.
05:22But as we know throughout history and the history of conquest and colonization and all this, some things can only
05:29be grown in certain places.
05:31So talk us through your products, where you get them, and how this all came to be, and the complicated
05:36web of navigating all that while trying to navigate these tariffs.
05:40Yeah, great question.
05:42When Ori and I went on Shark Tank a couple of years ago, we joked that the spice trade is
05:46the actual oldest profession in the world.
05:49No, I mean, it's not just the sort of biology or botany of where certain crops can grow, but also
05:56the longstanding traditions of growing those particular crops in different places.
06:01So, sure, you can't grow cinnamon in the United States, but we work with some really specialized cinnamon producers in
06:08central Vietnam.
06:08They grow a unique species, a rare species.
06:11We're the only company to import it.
06:13We call it royal cinnamon.
06:14It has a long history associated with the royal court in central Vietnam.
06:18We work with foragers in central Afghanistan, northeastern Afghanistan, rather.
06:22I was an aid worker there before starting the company, and so we still work with communities that I worked
06:28with as an aid worker to harvest this very special variety of wild cumin.
06:32We were the first company to import it into the U.S.
06:34The heritage depends on having a customer base in the U.S., and that's what we do as a company
06:40on a daily basis, and that's really what the tariffs have kind of attacked in particular, is these specific supply
06:46chains from places that grow really unique products.
06:50Ori, let me ask you just about the weight these tariffs have had on the business.
06:53We've heard of a lot of companies having to wrestle with whether or not to pass on additional fees to
06:58their customers.
06:59Take us behind the scenes as you look at your financials, as you have looked at your financials over the
07:03last many months.
07:05What has this done to the business, the imposition of these tariffs?
07:08What did they threaten to do to the business broadly?
07:11So when the reciprocal tariffs first came out back in last April, we looked at our business and said, what
07:16can we do?
07:17We can't bring Vietnamese cinnamon from everywhere else.
07:19We can't bring in herbs to Provence, not from Provence, which is what we do as a business philosophically.
07:25That's where you get the best spices in the world from.
07:27We looked around, and ironically, what we had realized is that the place where we can save the money that
07:31we're paying on tariffs was domestically.
07:33So we started looking at how fast do we ship things.
07:35We started saving money on cardboard and corrugate.
07:37We started looking at slowing down hiring and all these things.
07:40So the big irony of all this is that in order for us to keep prices steady, not raise prices,
07:44not push prices back onto the farmers to kind of cover these tariffs,
07:47what we ended up doing is all the savings came domestically.
07:50And with the IEPA tariffs being refunded, also thanks to the work from the Liberty Justice Center,
07:55that money that's coming back to us, which is in the low six figures, is going right back into the
07:59American economy and right back into investing in our own business.
08:02And we want the exact same outcome from these Section 122 tariffs in the same way.
08:06Sarah, what's next?
08:07Do you have to wait for this to get kicked up to the appeals court?
08:11Do you have any kind of timeline for this?
08:12And do you have other businesses coming to you and wanting the same results?
08:16Yes. So on Friday, the government did file their notice of appeal to the Federal Circuit Court.
08:23So we are waiting on that court to issue a briefing schedule and set a hearing date.
08:29I'm hoping that, like with the IEPA case, they expedite this.
08:33It's in their best interest.
08:35I think the government would want that, too, so they can get this settled once and for all.
08:38And we really need to get relief for these businesses that have not only been forced to pay the IEPA
08:44tariffs and wait for their refunds.
08:46Now they're paying these illegal tariffs, and it just has to stop.
08:51Sarah, what can you say about the government's capacity to defend the tariffs that the president has put in place
08:57here?
08:57I think there has been some speculation from the get-go that there are perhaps specious arguments from the president
09:01about the national security justifications,
09:03for instance, on the previous tariffs, on his use of these in this novel way.
09:07As you've gone through this process, how formidable were the opponents that you were up against?
09:14You know, they had an argument that made sense for them.
09:18I think we had a stronger argument.
09:20The court really focused on the statutory interpretation and what was going on in 1974 when Congress passed the Trade
09:27Act.
09:28Well, we were in a much different world, and the balance of payments deficit crisis can no longer exist in
09:35a floating rate exchange rate world, which is what we are in now.
09:38So the government was arguing that a trade deficit is, in fact, the same thing as a balance of payments
09:44deficit.
09:44We argued that it wasn't.
09:46The court agreed with us.
09:47So the court agreed with us.
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