By Nancy Orben, CPA, Senior Manager at Blue & Co.
Are you eligible for a tariff refund? The U.S. Supreme Court ruled on February 20, 2026, that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unlawful, and businesses that paid those duties can now apply to recover their payments. Getting started now can help you maximize your recovery and stay ahead of the process.
Here is a breakdown of where things stand and what you should be doing today.
The Court Ruling and Why It Matters
In Learning Resources, Inc. v. Trump, the Supreme Court made it clear that IEEPA does not give the President authority to impose broad tariffs. On March 4, 2026, the U.S. Court of International Trade (CIT) ordered U.S. Customs and Border Protection (CBP) to refund these tariffs to everyone who paid them, not just the companies that went to court.
CBP pushed back, citing the “unprecedented volume” of refunds and limitations in their systems. The CIT paused the refund process and asked CBP to produce a practical, phased plan. Then, on March 27, the CIT clarified an important point: refunds must extend even to entries that had already reached “final” liquidation (beyond the usual 180-day protest window). CBP later announced on April 20 that Phase One of its refund system was operational.
How Will The Refund Process Work?
CBP built a new tool within its Automated Commercial Environment Portal (ACE Portal) called the Consolidated Administration and Processing of Entries, or CAPE for short, to submit and process requests for refunds of IEEPA duties.
- Phase 1 (launched April 20, 2026): Importers and customs brokers submit a CAPE Declaration through the ACE Portal to request refunds of unliquidated and recently liquidated entries by uploading a CSV file that contains all entries subject to IEEPA duties that are unliquidated or that have been liquidated within the last 80 days. CBP will review the data, adjust the entries, and send refunds electronically.
- Later Phases: CBP has promised to build out processing for liquidated entries that are “final” (those past the 80-day window), but no firm timeline has been published. If your entries fall into this group, keep a close eye on updates and consider getting legal advice.
- Timing and Interest: Once a CAPE Declaration is accepted, CBP aims to liquidate affected entries within 45 days. Generally, valid IEEPA refunds, including interest on the duties originally paid, are issued within 60 to 90 days of acceptance, provided the entries are not flagged for further review, extension, or suspension. Refunds will include interest on the duties you originally paid.
One important note: The government has begun appealing CIT refund orders, which started on May 4, 2026. An appeal could slow things down or narrow the scope, especially for entries that have been finally liquidated. It is smart to plan with that possibility in mind and protect your rights in the meantime.
Six Key Actions in the Refund Process
- Determine whether your shipping partner will file for you. UPS and FedEx have indicated that they will file on their customers’ behalf and/or they will issue refunds to shippers who paid the charges. If they are not, then step two is to determine if their shipping partner is filing for IEEPA refunds. The UPS FAQ says you can visit the ACE Portal for information on entries UPS filed on your behalf.
- Ensure you have an ACE Portal account and enroll in ACH electronic refunds right away if you must file your own claim. CBP requires all duty refunds to be issued electronically through the Automated Clearing House (ACH). If your company is not set up in your ACE Portal with a valid U.S. bank account, your refund will be delayed or rejected. Instructions to enroll and manage ACH refunds can be found here.
- Gather and organize your entry data. You will need clean, detailed records for every affected entry: entry numbers, CBP Form 7501 summaries, the exact IEEPA duty amounts paid, country of origin, and HTS codes. Custom brokers can work with you to pull this from ACE and reconcile the transactions to your accounting and/or shipping records.
- Check the status of each entry. Sort them into liquidation status: unliquidated, recently liquidated (within 80 days), or liquidated and final. This will tell you which CAPE phase covers the entry and whether you should consider filing protests to preserve your rights for entries nearing the 180-day deadline.
- Keep filing protests where it makes sense. Even with the broad CIT order in place, many trade lawyers recommend continuing to file protests within the 180-day window as a safety net. Please consult with trade lawyers on this subject.
- Review your customer contracts. If you passed along a separate “Tariff Surcharge” or IEEPA line item to customers, review those agreements. You may have a legal or contractual duty to share the refunds, and you will need to understand how to properly account for the refunds. Consult legal counsel for guidance on your legal obligations.
How to Manage the Accounting When Refunds Arrive – GAAP Financial Statements
- Inventory still on hand: Lower the carrying value of that inventory (debit Cash or Refund Receivable, credit Inventory). No immediate income statement impact.
- Inventory already sold: Record the refund as a reduction to Cost of Goods Sold (COGS) in the period you receive it (debit Cash/Receivable, credit COGS). This is treated as a change in accounting estimate under ASC 250. This is a prospective-only treatment with no restatement of prior periods.
- Mixed cases: Split the refund proportionally between remaining inventory and COGS, based on units still held versus sold.
- For manufacturers: You will need to trace tariffs paid on raw materials through work-in-process and finished goods. This usually requires a detailed SKU- or lot-level allocation.
- The interest portion: Any interest included in the CBP refund should be booked separately as Interest Income, not as a cost reduction.
- Customer obligations: If you are likely to owe refunds or credits to customers (and the amount is reasonable), accrue a liability under ASC 450. Consider setting up a “Contingent Refund Liability” account early to avoid surprises. Remember: your GAAP treatment is separate from your actual legal/contractual duty to pass money along to customers.
These entries should be clearly disclosed in your financial statement footnotes (usually under inventory valuation or COGS). If the refund relates to a prior period but arrives before you issue statements, you may also need a subsequent events disclosure under ASC 855.
How We Can Help
If your business paid IEEPA-related duties, now is the time to get organized. Confirm who will file, validate your entry data, and plan for the financial reporting impact of refunds and interest. Contact your Blue & Co. advisor to discuss your situation and coordinate next steps with your customs broker and legal counsel as needed, including support on the GAAP accounting treatment when refunds are received.
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