IEEPA Tariff Refunds: How Manufacturers Should Account for Them

If you imported materials or components between February 2025 and February 2026, you probably paid IEEPA tariffs, and you may be owed a refund. On February 20, 2026, the Supreme Court held in Learning Resources, Inc. v. Trump (decided together with Trump v. V.O.S. Selections, Inc.) that the International Emergency Economic Powers Act doesn't authorize tariffs. CBP has been processing refunds since April. As of October 23, 2026, it had accepted about $137.9 billion in potential and certified refunds for processing and had sent about $127.7 billion to the Treasury for payment.

So the money is real and it's moving. Before year-end, I want manufacturers thinking about the accounting. When do you book the refund? Where does it go in your books? What might you owe your own customers? And how does it hit your taxes and cash?

This is general information, not legal, customs or tax advice. Work with your customs broker, trade counsel and CPA on your specific entries.

Which entries qualify for a refund right now?

Refunds aren't automatic. You or your customs broker file a declaration through CBP's CAPE process (Consolidated Administration and Processing of Entries) in the ACE portal. What you can file depends on where each entry sits:

Phase	Opened	What it covers
Phase 1	April 20, 2026	Unliquidated entries and entries within 80 days of liquidation. Some entry types are excluded, such as AD/CVD, drawback and entries under protest
Phase 2	June 29, 2026	Entries flagged for reconciliation (types 01, 02 and 06) with no reconciliation entry filed, still unliquidated or within 80 days of liquidation
Phase 3	October 6, 2026	Certain finally liquidated entries, limited to importers in court cases where the Court of International Trade ordered reliquidation

Older, finally liquidated entries are the open question. On October 8, 2026, the Court of International Trade certified a class in Freestyle World, Inc. v. United States covering importers that paid IEEPA duties between February 1, 2025 and February 19, 2026, other than those already in their own lawsuits. That ruling only certified the class. It didn't decide the case or order refunds. Separately, the government's appeal of the trade court's broader refund orders is still pending at the Federal Circuit. If you have large finally liquidated balances, talk to trade counsel about where you stand.

Here's what I'd get done now:

• Get the list. Ask your broker for every entry with IEEPA duties: entry date, liquidation status and duty paid.
• Set up ACH refunds in ACE. CBP has issued refunds electronically since February 6, 2026, and it holds refunds when no bank account is on file. As of late October, about $990 million was sitting in that bucket. A new ACE account can take up to six weeks, so don't wait.
• Check your Form 5106 data. Since September 18, 2026, CBP has been voiding importer-of-record numbers with incomplete or inaccurate information. A voided number can stop your refund.
• Only file through ACE or your broker. CBP has warned about refund scams using look-alike "CAPE claim" sites.
• Keep the paperwork together. Entry summaries, commercial invoices and bills of lading. Your CPA and auditor will ask for them.

Where did the tariffs land in your books?

How you record the refund depends on where the original duty went. For most manufacturers, duty on imported materials was part of landed cost. It went into inventory and then into cost of goods sold as product shipped.

So every dollar of IEEPA duty is sitting in one of three places today:

1. Cost of goods sold. The product was sold.
2. Inventory. Raw materials, work in process or finished goods still on hand.
3. Fixed assets. Duty on imported equipment that you capitalized.

Build a simple schedule by entry: duty paid, where it went, and how much is still on the balance sheet. That schedule drives everything below, and it's the first thing an auditor will ask for.

When should you record the refund?

There's no US GAAP standard written for tariff refunds, so companies apply existing guidance by analogy. Deloitte and KPMG both describe two approaches:

• Loss recovery. The refund recovers a cost you already recognized. You record a receivable when recovery is probable, capped at the cost you've recognized. Deloitte calls this its preferred view and says probability should be judged entry by entry.
• Gain contingency. You wait until the refund is realized or realizable, usually when it's approved or paid. It's more conservative and easier to support.

Either one can work if you apply it consistently and disclose it. In practice, entries CAPE has already accepted or paid are much easier to call probable than finally liquidated entries that depend on how the litigation ends.

Two details people miss:

• Interest is separate. CBP pays interest on refunds. Deloitte treats that interest as a gain contingency: book it when it's realized or realizable, as non-operating income. The refunded duty itself goes back against the line where the cost was originally recorded.
• Duty still in inventory or fixed assets is a policy choice. You can recognize a refund only for amounts already expensed, or you can also reduce the carrying value of the related inventory or equipment. Pick one, document it and stick with it.

What do you owe your customers?

This is the step that surprises people. Did you pass tariffs on with a surcharge line, a tariff clause or a price increase you tied to tariffs? Then some of those customers will expect a share of the refund.

• Read your contracts and price notices. An explicit pass-through clause can create an obligation to refund.
• Think about what you told customers. Emails, public statements and past practice can create an implied obligation even without contract language.
• Book it under revenue guidance. Under ASC 606, amounts you expect to give back to customers are variable consideration and reduce revenue. You may need to record that liability before your own refund receivable qualifies.

I'd make the customer decision on purpose: who gets a credit, how you calculate it, and how you tell them. Handled well, it builds trust with your best accounts.

How do tariff refunds hit taxes and cash?

Taxes. Under the tax benefit rule, a refund of duties you already deducted through cost of goods sold is generally taxable income. Refunds on goods still in inventory generally reduce inventory cost instead. For accrual-method taxpayers, timing follows the all-events test, and booking a receivable in audited financial statements can pull income forward. Interest is ordinary income. Credits you pay customers are generally deductible when you actually pay them. Your CPA should run the numbers before December 31; our page on how we work with your CPA explains how we split that work.

Cash. Put refunds in your 13-week cash flow forecast once they're accepted, and put customer credits in at the same time. Don't spend money you haven't received.

Your bank. A big refund can help your covenant ratios, and a customer refund liability can take some of that back. I'd tell your lender what's coming before quarter-end rather than after.

One more thing: the replacement tariffs under other laws, like Section 232 and Section 301, aren't part of CAPE. They're still in your costs, so build them into your 2027 standard costs and pricing. Our post on tariffs in your manufacturing cost structure walks through how.

Year-end checklist

Task	Who usually owns it
Entry-level list of IEEPA duties, with liquidation status	Customs broker
ACE access, ACH refund setup and Form 5106 confirmed	Importer and broker
Schedule of where each duty sits: COGS, inventory or fixed assets	Accounting
Written recognition policy and probability assessment	Controller or CFO
Review of customer contracts and tariff surcharge notices	Sales, CFO and counsel
Tax treatment confirmed	CPA
Refunds and customer credits in the cash forecast	Accounting

If you want help building the duty schedule, picking a policy or modeling what this does to margin and cash, that's the kind of work our manufacturing accounting team does. If you also paid duties you might recover another way, read duty drawbacks explained.

Frequently Asked Questions

Are IEEPA tariff refunds automatic?

No. You or your customs broker file a declaration through CBP's CAPE process in ACE, and what you can file depends on each entry's liquidation status. You also need ACH refund information on file, because CBP only issues refunds electronically.

When should a manufacturer record an IEEPA refund?

Most companies either record a receivable when recovery is probable (loss recovery) or wait until the refund is realized or realizable (gain contingency). Either can be acceptable if applied consistently and disclosed. Interest is generally recorded only when realized. Confirm the approach with your auditor or CPA.

What if the tariffs are still in our inventory?

You can recognize a refund only for duties already expensed through cost of goods sold, or also reduce the carrying value of the related inventory. Choose one policy, document it and apply it consistently.

Do we have to pass refunds on to customers?

Possibly. If you passed tariffs through with surcharges, contract clauses or tariff-based price increases, customers may be entitled to a share. Review contracts and customer communications with counsel, and account for expected customer refunds as a reduction of revenue.

Are tariff refunds taxable?

Generally, refunds of duties you previously deducted are taxable when recovered, and interest on refunds is taxable. Refunds on duties still in inventory usually reduce inventory cost instead of creating income. Confirm the timing and treatment with your CPA.