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As the U.S. tariff and refund environment and processes evolve, how companies handle their specific situations at the outset could have complex and potentially irreversible downstream implications.
A lack of cross-functional coordination, inconsistent data and poor documentation now could result in unexpected financial, tax and compliance outcomes later, and decisions may lock companies into positions that are difficult to unwind. Carefully analyzing tariff-related decisions and coordinating responses among different business functions when submitting refund claims can help position companies to receive appropriate amounts while managing tax, accounting and compliance goals.
Below are three potential pain points companies should consider as they navigate their own unique tariff refund situations and contemplate future trade-related business decisions.
Refund timing
The issue: Following the Supreme Court’s February decision striking down the International Emergency Economic Powers Act (IEEPA) tariffs, U.S. Customs and Border Protection (CBP) has begun refunding tariffs previously imposed under IEEPA. CBP is rolling out the scope of entry types importers can file for in phases.
The first phase, which launched in April, has processed simpler entries on which IEEPA duties were paid within certain time limits, but entries flagged for reconciliation and other categories that were more complex were to be addressed in later phases. CBP communicated a general 90-day timeframe for refund receipt, but many refunds are coming in piecemeal, making it difficult to track filing and receipt.
All importers of record who may be entitled to IEEPA tariff refunds could be affected by this.
Companies may receive large refunds but lack clear guidance on timing and how to treat them for tax and accounting purposes. There may be multiple valid accounting approaches, so improved coordination within a company’s different business functions can help prevent inconsistencies that might get flagged in an audit.
Companies that are entitled to a refund should monitor information coming from CBP about the refund process. Due to the evolving policy landscape, uncertainty about refund timing and the Trump Administration’s shifts from one form of tariff to another in the wake of legal challenges, companies that may be expecting refunds have, in some cases, been waiting to determine how to account for them.
Companies should confirm enrollment in the Automated Clearing House (ACH) Refund program, which is required to receive refunds from CBP. It also is important to determine and document when imports took place and to segment entries by status, including whether they were flagged for reconciliation, were suspended, extended or under review, to determine in what phase they might be addressed and how and when to recognize and record potential refunds for tax and accounting purposes. Importers also need to consider the legal implications on entries that are finally liquidated but not subject to pending judicial action, as the government maintains such entries are ineligible for refunds. That point is undergoing review in the courts.