This article was written in collaboration with Jon Yormick, Founder & Managing Member, Yormick Law & Anne Brandon, Associate Attorney, Yormick Law.
Recent federal court rulings have significantly changed the tariff landscape for U.S. manufacturers and distributors. On February 20, 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose broad, non-security related tariffs, invalidating tariffs that had been imposed under that authority on imports from countries such as China, Mexico, and Canada. Subsequent actions by the U.S. Court of International Trade (CIT) and U.S. Customs and Border Protection (CBP) indicate that relief is not limited to the named plaintiffs, and they have begun to clarify how refunds of those tariffs may be handled.
For companies that paid IEEPA-based tariffs, these rulings create both an opportunity to recover duties and a need to act carefully and comply with evolving administrative requirements.
What the Supreme Court Decided
The Supreme Court held that IEEPA does not grant the executive branch authority to impose wide-ranging tariffs for general trade or economic leverage purposes. The Court concluded that IEEPA’s grant of authority of this scope rests with Congress, not the President. As a result, tariffs imposed under IEEPA were unauthorized from the time they were imposed.
While the ruling resolved the legality of the tariffs themselves, it did not lay out a detailed process for refunding duties that had already been collected. That gap has driven additional litigation and administrative guidance over the past several weeks.
Court of International Trade: Refunds Are Not Limited to Plaintiffs
In early March 2026, the Court of International Trade issued a significant order directing CBP to liquidate or reliquidate entries without regard to IEEPA tariffs, effectively requiring refunds of unlawfully collected duties. Importantly, the CIT signaled that relief should not be limited only to companies that were plaintiffs in the original lawsuits. Instead, the court indicated that all importers of record whose entries were subject to IEEPA tariffs are entitled to the benefit of the Supreme Court’s decision, subject to applicable procedural rules.
This non-plaintiff specific approach substantially expands the population of importers that may be eligible for refunds on qualifying tariffs paid.
CBP Refund Process: What We Know So Far
Following the Court of International Trade’s March 2026 orders, U.S. Customs and Border Protection (CBP) has provided more detailed guidance on how IEEPA tariff refunds will be processed. Rather than issuing automatic refunds, CBP is developing a centralized, automated refund system within its Automated Commercial Environment (ACE), known as the Consolidated Administration and Processing of Entries (CAPE).
Under CBP’s current framework, importers or their customs brokers will be required to submit refund requests through a CAPE claim portal in ACE, providing data on the entries for which they are seeking refunds in a csv file. The CAPE system will perform automated validations, remove IEEPA-related tariff provisions, recalculate duties without the invalidated tariffs, and route entries through liquidation or reliquidation as appropriate. Once certified by CBP, approved refund amounts (including applicable interest) will be issued electronically to the importer’s designated bank account. CBP has been issuing duty refunds via Automated Clearing House (ACH) since February 2026, meaning that importers that have not completed ACH enrollment may have refunds rejected until electronic enrollment is completed.
CBP has indicated that the CAPE system is being developed in phases, with certain components partially completed and initial functionality expected to address simpler refund scenarios first. More complex entries, including those including antidumping or countervailing duties, may be added over time as the system is refined. While the Court has temporarily suspended immediate refund requirements to allow CBP to finalize this process, the Court has also stated that CBP’s progress to date has been satisfactory and continues to oversee implementation. Importers should expect that refunds will require affirmative action once the system is live, including verifying the accuracy of data submitted and making any necessary corrections. CBP also anticipates having a review period, meaning that the overall refund timeline may extend over several months.
Why This Matters for Manufacturers & Distributors
For manufacturers and distributors, the impact of these rulings goes beyond the potential cash recovery:
- Cash flow and working capital: Refunds could be material, particularly for companies with high import volumes during the IEEPA tariff period.
- Cost accounting and inventory valuation: Previously capitalized tariff costs may need to be reassessed if refunds are received.
- Contracts and pricing: Tariff clauses in customer and supplier agreements may need review to determine who ultimately benefits from any recovery.
- Forecasting and budgeting: The removal of IEEPA tariffs and the possibility of refunds complicate forward-looking pricing and margin analysis.
- Compliance risk: Claims must be properly documented and timely to avoid forfeiting recovery rights.
What Companies Should Be Doing Now
Although details are still evolving regarding the refund process and timing, companies can take several practical steps now:
- Identify exposure – Determine which imports were subject to IEEPA tariffs and quantify duties paid. Ideally this should be done by setting an ACE account and running an ACE report, as this reflects the information CBP sees.
- Confirm importer of record status – Refunds are generally expected to be issued to the importer of record, even if tariff costs were passed through contractually.
- Preserve documentation – Entry summaries, liquidation notices, and payment records will be critical to support refund claims.
- Evaluate accounting implications – Consider the financial statement impact of potential refunds, including timing, recognition, and disclosure considerations.
- Monitor deadlines and guidance – CBP procedures and court ordered timelines may create narrow windows to act.
Selling Refund Rights to Third Parties
As companies await clarity on refunds tied to tariffs imposed under the IEEPA, some importers are choosing to monetize potential claims now by selling their refund rights to third-party investors at significant discounts. These arrangements can raise complex financial reporting issues, especially when considered in conjunction with the issues previously mentioned. Generally, these transactions are being treated as borrowings rather than gains given the uncertainty that remains with the refund status and process.
How We Can Help
Trade policy developments like this tariff refund ruling can create both opportunity and complexity for manufacturers and distributors. Evaluating eligibility, navigating the refund process, and addressing the related accounting and financial reporting considerations require careful coordination across tax, trade, and finance functions.
The Bonadio Group works closely with manufacturers, distributors, and importers to assess tariff exposure, support refund recovery efforts, and evaluate the associated financial statement and cash flow implications. Our team can also assist with documentation, internal controls, and ongoing trade and accounting considerations as guidance continues to evolve.
If you have questions about how this ruling may affect your organization or would like assistance navigating the refund process and related accounting considerations, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
