The U.S. Supreme Court’s recent decision striking down certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA) has opened the door for many U.S. small businesses to seek refunds. However, determining whether your business qualifies—and understanding what steps to take next—can be challenging.
As we learn more about the refund process, this guide provides information to help small businesses identify whether they paid IEEPA based tariffs, understand what types of duties may be eligible for refunds, and prepare for the emerging refund process.
What is the latest on the refund process?
After the Supreme Court’s Feb. 20 decision on IEEPA, the U.S. Court of International Trade (CIT) ordered the government to take immediate action on refunds.
On March 6, Customs and Border Protection (CBP) submitted a rough plan for an expedited and simplified tariff refund system to the CIT. CBP indicated it would be able to create and launch the tariff refund system within 45 days (by April 20).
CIT is expected to continue to engage with CBP to see that the plan is put in place. On March 12, CBP released new details of a 4-step refund system. Those steps are detailed below.
The U.S. Chamber welcomed the CBP proposal, and we expect to learn more from the administration in the days ahead. More information can be found here as it becomes available.
Who is impacted?
More than 300,000 companies paid a total of approximately $166 billion in IEEPA duties that must be refunded. These duties were collected on more than 53 million entries.
Do I qualify for a refund?
U.S. importers of record who directly paid the tariffs or the person who takes ownership of the goods once they have cleared customs (the “consignee”) may be eligible for a refund.
Businesses that did not directly pay the tariffs are not eligible for a refund.
Refunds are only available for tariffs applied under IEEPA. This includes tariffs commonly known as “fentanyl,” “trafficking,” “reciprocal,” or “baseline” tariffs, as well as some other tariffs applied to goods from Brazil and India.
Refunds are not available for so-called Section 232, Section 301, Section 201, anti-dumping and countervailing duties (AD/CVDs), or most-favored nation (MFN) tariffs. To determine the legal authority under which tariffs you have paid were applied, consult your customs broker, counsel, or government sources.
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How is CBP proposing to issue refunds?
The tariff refund system proposed by CBP will distribute refunds to importers through CBP’s Automated Commercial Environment (ACE) system.
CBP said that it “is confident that it can develop and implement new ACE functionality that will streamline and consolidate refunds and interest payments on an importer basis, rather than issuing 53,173,939 separate entry-specific refunds with multiple payments going to the same importer.”
Will the refund system work for all IEEPA tariff refunds?
It remains unclear whether the system will apply to all entries regardless of liquidation status. At the very least, it should apply to all unliquidated entries and certain entries that have already been liquidated, and these represent a very large share of the total.
Full details on the arrangement and how it will apply for IEEPA entries that have been liquidated are not yet available.
How exactly will the refund system work?
In a declaration filed on March 12, CBP explained that it is developing the Consolidated Administration and Processing of Entries (CAPE) system to calculate and provide refunds of duties imposed under IEEPA. This new ACE functionality will have four integrated components:
- The Claim Portal will allow importers and brokers to submit refund requests to CBP via a web-based interface for processing and validation. Filers will be able to upload summaries of entries for which they are requesting IEEPA refunds in a standard format.
- The Mass Processing component will remove IEEPA tariff codes and recalculate duties as if those tariffs were never applied. At the end of this stage, the system accepts the CAPE Declaration.
- The Review and Liquidation/Reliquidation component will review entries identified in the accepted CAPE Declaration. It will update the underlying entry summaries to reflect the new total duties paid and will automatically calculate interest, schedule liquidations, and direct manual reviews as needed.
- The Refund component will consolidate and process refunds electronically to designated accounts as established in the CAPE Declaration.
One thing to do right now: One essential and practical step importers should do now in anticipation of tariff refunds is sign up for Automated Clearinghouse (ACH) Refund. CBP requires ACH enrollment to receive duty refunds electronically. After enrolling for ACH refunds, any refund you receive will automatically be deposited directly into your bank account. Companies may wish to consult with their customs broker or trade counsel.
What about interest?
CBP acknowledges that in addition to refunding the IEEPA duties, they must also pay importers interest, as required by law.
The law requires that interest on “excess moneys deposited” with CBP (overpayments) shall accrue from the date the importer of record deposits estimated duties until the date of liquidation or reliquidation (19 U.S.C. § 1505(c)). Interest continues to accrue until the date of refund or liquidation/reliquidation.
The interest rate is 6% at present. CIT has noted that “interest is accumulating every day, with approximately $650 million accruing per month,” a fact that hopefully will incentivize expeditious refunds.
What questions should I ask a customs broker?
Customs brokers provide invaluable services for small businesses engaged in international trade and will be the front line for small businesses seeking tariff refunds.
To represent your interests appropriately, customs brokers will need to learn about the requirements for the new tariff refund system being developed, organize submissions in line with its requirements, and ensure you have taken the necessary steps to receive refunds electronically.
Caution: There will likely be scammers and fraudsters who try to take advantage of the confusion over tariff refunds after the U.S. Supreme Court’s decision. Please only work with well-established, legitimate customs brokers to navigate the tariff refund landscape.
How do I account for tariff refunds for federal income tax purposes?
The answer to this question is nuanced and will depend on the treatment of the original/underlying expense and the nature and structure of your business, among other considerations. The U.S. Chamber does not provide legal or tax advice. Please consult an attorney or a qualified tax professional for more information.
Watch: What the Supreme Court Decision Means for Small Business
Read a recap of the Feb. 23 Small Business Update episode here.
Additional Resources
Read the U.S. Chamber’s full statement applauding the Supreme Court ruling here and letter to the Treasury Secretary here.
“The Supreme Court’s decision is welcome news for businesses and consumers. Over the past year, the Chamber has been working with small and midsize businesses around the country that have seen significant cost increases and supply chain disruptions as a result of these tariffs. Swift refunds of the impermissible tariffs will be meaningful for the more than 200,000 small business importers in this country and will help support stronger economic growth this year.
"We encourage the administration to use this opportunity to reset overall tariff policy in a manner that will lead to greater economic growth, larger wage gains for workers, and lower costs for families." - Neil Bradley, Executive Vice President and Chief Policy Officer at the U.S. Chamber of Commerce
You can also visit the U.S. Chamber’s Tariffs page and track court case updates here.
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