With 132 billion dollars in invalidated IEEPA tariffs moving through CBP’s refund pipeline, a delayed third phase, 1.7 billion dollars stranded over missing bank details, and a government appeal threaten to slow the largest duty giveback in American history
WASHINGTON, September 1, 2026: The largest customs refund operation ever attempted by the United States government entered September under visible strain, as importers absorbed the news that Customs and Border Protection has indefinitely postponed the third phase of its refund processing tool, left roughly 1.7 billion dollars in approved refunds sitting untransmitted for want of bank account information, and now faces a Justice Department appeal that could cut off refunds entirely for importers who never filed suit.
The refund machinery is the direct legacy of the Supreme Court’s February 20 decision holding, six to three, that the President lacks authority to impose tariffs under the International Emergency Economic Powers Act. That ruling invalidated the sweeping duties imposed during 2025 on imports from most of the world, and it obligated the government to return what has grown into one of the largest pools of money ever unwound from federal revenue. According to a declaration filed with the US Court of International Trade in early August by Brandon Lord, executive director of CBP’s Trade Policy and Programs Directorate, more than 132 billion dollars in potential and certified refunds had been accepted for processing through the agency’s new Consolidated Administration and Processing of Entries system, known as CAPE, with roughly 106.6 billion dollars certified and sent to Treasury for disbursement as of August 21, about 64 percent of the estimated pool, including interest.
The refunds have already left a mark on the broader economy. The Wall Street Journal reported last week that second-quarter corporate profits surged, with S&P 500 per-share earnings up 53 percent year over year, lifted in part by tariff refunds flowing back onto balance sheets alongside artificial intelligence investment and resilient consumer demand. Analysts quoted in that coverage cautioned that the refund benefit is temporary, a one-time recapture of costs paid in 2025, and that the underlying consumer picture remains uneven.
A pipeline built at speed, now backing up
CBP built CAPE in months, an unprecedented undertaking for an agency whose entry systems were never designed to run in reverse at scale. Phase 1 opened April 20, covering straightforward consumption entries. Phase 2 followed June 29, adding entries flagged for reconciliation for which no reconciliation entry had been filed. Phase 3, which trade professionals expected to capture the most complicated population, including entries with post-summary corrections, drawback claims, and other layered transactions, was originally scheduled to launch August 20.
It did not. CBP confirmed on August 25 that Phase 3 is postponed until further notice, without offering a revised date, according to alerts published by trade law firms and customs brokers including Diaz Trade Law and GHY International. The agency has not publicly detailed the reasons, though practitioners point to the sheer complexity of unwinding entries that have been amended, reconciled, or claimed against since liquidation, as well as the operational load of processing the first two phases while responding to litigation deadlines.
The numbers filed with the court illustrate both the scale and the friction. As of the August status update, 272,029 CAPE declarations had been submitted, of which 191,494 passed file validation, and 17.69 million validated entries had been liquidated without IEEPA tariffs and entered the refund process. At the same time, 22,170 approved refunds totaling approximately 1.7 billion dollars had not been transmitted to Treasury for a mundane reason: the importers had not provided ACH bank account information. CBP has urged filers repeatedly to complete banking details in the ACE portal, and brokers describe a late-summer scramble to track down importers of record, some of them dissolved, acquired, or simply inattentive, whose money is waiting.
The Court of International Trade has settled one foundational question: refunds go to the entities that directly paid the duties, the importers of record or their brokers, not to downstream customers who may have absorbed the cost through pricing. That ruling simplified administration while igniting commercial disputes across supply chains, as purchasers who funded tariff costs through duty-inclusive pricing negotiate with suppliers over who ultimately keeps the government’s money.
How the money got here
Understanding the logjam requires rewinding nineteen months. Through 2025, the administration imposed successive rounds of tariffs under the International Emergency Economic Powers Act, a 1977 statute historically used for sanctions rather than tariffs, covering imports from virtually every trading partner at rates that ranged from a global baseline to punitive country-specific levels. Importers paid as ordered, and by early 2026 the government had collected well over 100 billion dollars under the program. Legal challenges moved quickly. The Court of International Trade ruled against the tariffs, the Federal Circuit largely agreed, and the Supreme Court granted review on an expedited basis.
The February 20 decision resolved the question comprehensively. Writing for a six-justice majority, the Court held that IEEPA’s grant of authority to regulate importation does not include the power to impose tariffs, which the Constitution assigns to Congress and which Congress has delegated only through specific trade statutes with defined procedures. The ruling left intact other uses of IEEPA in the customs sphere, a distinction the Court of International Trade applied in August when it upheld the administration’s elimination of the de minimis exemption for low-value imports, concluding that IEEPA does authorize that narrower action even though it cannot support tariffs.
What the Supreme Court did not do was write a refund manual. The mechanics fell to the Court of International Trade, which issued injunctions requiring the government to identify, reliquidate, and refund affected entries, and to CBP, which had to build a system to do it. The result was CAPE, bolted onto the agency’s Automated Commercial Environment portal, through which importers submit declarations identifying their affected entries and provide payment instructions. Entries flow through validation, reliquidation without the invalidated duties, certification to Treasury, and finally disbursement with statutory interest.
Each stage has proven to be a bottleneck in turn. Early validation failures ran high as importer submissions collided with CBP’s entry records. Reliquidation volume, 17.69 million entries and counting, has no precedent in the agency’s history. And the final step, moving money, now waits on something as simple as bank account details for more than twenty-two thousand approved refunds.
The appeal that could split the pool
The most consequential legal development of the summer is the government’s effort to narrow who gets paid at all. On August 10, the Department of Justice filed its opening brief in a consolidated appeal at the US Court of Appeals for the Federal Circuit challenging the Court of International Trade’s universal injunctions governing IEEPA duty refunds. The government’s core argument, as summarized by Diaz Trade Law and analyzed by Holland and Knight, is that CBP has no authority to reliquidate finally liquidated entries on its own initiative. If the Federal Circuit accepts that position and vacates the injunctions, importers whose entries have finally liquidated and who never filed suit would have no administrative path to a refund.
The stakes of that distinction are enormous. Holland and Knight warned clients bluntly in a July advisory that the CIT’s order confirms only importers that have sued will get full refunds, advice that produced a wave of protective filings at the court through the summer. Trade attorneys estimate that thousands of importers, particularly small and mid-sized companies that assumed refunds would arrive automatically, are exposed if the appellate court sides with the government. The Federal Circuit cleared the way for refund litigation to resume earlier in the summer, as Buchalter reported, and briefing will continue into the fall, with argument expected before year end.
The government’s posture strikes many observers as paradoxical: the administration is simultaneously operating the refund program under court order and arguing on appeal that much of it exceeds CBP’s authority. Budget analysts see a fiscal motive. The Penn Wharton Budget Model estimated earlier this year that IEEPA tariffs collected before the Supreme Court ruling, plus accrued interest, represent one of the largest one-time fiscal reversals on record, and every entry excluded from mandatory refund processing reduces the outflow.
Importers navigate the maze
For importers, the practical guidance emerging from brokers and law firms has converged on several points. First, file the CAPE declaration and complete ACH banking information immediately, since approved refunds cannot move without it, as the 1.7 billion dollar untransmitted balance demonstrates. Second, importers with finally liquidated entries who have not yet filed suit should evaluate protective litigation before the Federal Circuit rules, because the difference between suing and waiting may become the difference between full recovery and nothing. Third, importers with entries caught in the delayed Phase 3 population, including reconciliation and post-summary correction entries, should document their claims thoroughly and watch for CBP guidance, since no administrative window is currently open for them.
Customs brokers report that the refund process has also exposed data hygiene problems accumulated over years. Importer of record numbers with stale addresses, mismatched corporate names following mergers, and inconsistent entry records are all surfacing as validation failures in CAPE. The timing is awkward: CBP separately announced in an August 19 Federal Register notice that beginning September 18 it will immediately void importer of record numbers when information on Form 5106 is inaccurate or incomplete, a policy that compliance professionals say could catch companies mid-refund if their registration data is deficient.
UPS Supply Chain Solutions and other logistics providers have built dedicated refund request services, and an entire cottage industry of consultants now offers contingency-fee refund recovery, echoing the duty drawback industry. Trade veterans caution importers to scrutinize fee arrangements, noting that for most companies the CAPE filing is straightforward enough to complete in-house or through their existing broker.
Small importers, big consequences
The distributional pattern of the refund program has drawn attention from policymakers and academics. Large importers with sophisticated trade functions filed CAPE declarations within days of each phase opening, engaged counsel to file protective suits, and in many cases have already received the bulk of their money. Smaller importers, by contrast, are overrepresented in every friction category: the unvalidated declarations, the missing ACH population, and the pool of companies with finally liquidated entries and no lawsuit on file.
Trade associations representing small and mid-sized importers have asked CBP for extended outreach, simplified filing paths, and a public commitment that no eligible importer will be time-barred while the Federal Circuit appeal is pending. The agency has responded with webinars, bulletins, and broker outreach, but practitioners say the structural problem remains: the refund system assumes a level of customs sophistication that a company importing a few hundred thousand dollars of goods a year rarely has. Some percentage of the pool, they predict, will simply never be claimed, a windfall to the Treasury born of administrative complexity rather than legal entitlement.
There is precedent for that concern. In prior large-scale customs refund episodes, including the Harbor Maintenance Tax litigation of the late 1990s and various antidumping refund programs, meaningful shares of eligible refunds went unclaimed for years. The IEEPA pool dwarfs those precedents by two orders of magnitude, which means even a small unclaimed percentage represents billions of dollars.
The interest component adds its own urgency. Refunds are paid with interest calculated from the date of deposit, at rates that have made the government’s carrying cost material. Fiscal analysts note the paradox that every month of delay increases the ultimate outflow, giving the government a financial incentive for speed that sits in tension with the legal position its own Justice Department is arguing on appeal.
Voices from the trade
Across the customs bar and the brokerage community, assessments of CBP’s performance are more sympathetic than the raw numbers might suggest. The agency, practitioners point out, was handed an obligation with no statutory playbook, no appropriated implementation budget, and a docket of active litigation dictating its timelines. That it has moved more than 100 billion dollars in roughly four months is, by the standards of federal financial operations, remarkably fast.
The criticism concentrates instead on communication. The Phase 3 postponement was announced with minimal explanation and no revised date, leaving importers with reconciliation and post-summary correction entries unable to plan. Brokers report that client questions about Phase 3 eligibility, timing, and documentation requirements currently have no authoritative answers. Norton Rose Fulbright, BDO, and other advisory firms have published frequently-asked-questions resources that acknowledge, on multiple key points, that CBP guidance is still pending.
The episode has also become a live argument in the broader policy debate over tariff governance. Congressional critics of unilateral tariff authority cite the refund program as the measurable cost of policy built on contested legal foundations, while defenders of the administration argue the Supreme Court ruling itself, not the tariffs, created the disruption. What neither side disputes is the accounting: the United States government is returning more money to importers in 2026 than it collected in total customs revenue in a typical year of the previous decade.
The macroeconomic echo
The refund flood is producing effects that economists are still working to measure. The second-quarter profit surge documented by the Journal reflects refunds recognized as income by companies that expensed tariffs in 2025, a temporary earnings tailwind that analysts warn will flatter year-over-year comparisons through early 2027 before reversing. Retailers and manufacturers have deployed the cash variously into buybacks, debt reduction, and in some cases price investment, though there is little evidence so far of systematic consumer price rollbacks tied to refunds.
The episode has also reshaped how corporate America prices tariff risk. Treasurers who watched billions paid under an invalidated statute eventually return, with interest, but only after litigation, system failures, and an appeal that may yet claw back eligibility, have learned that duty payments are not necessarily final in either direction. Several Fortune 500 companies disclosed in second-quarter filings that they are maintaining litigation reserves and protective court filings as standard practice for all significant tariff programs, including the Section 301 forced-labor duties that replaced the IEEPA regime and are themselves now under challenge by 25 states at the Court of International Trade.
The refund program’s interaction with the current tariff landscape adds another layer. The duties being refunded were replaced first by temporary Section 122 tariffs and then, on July 24, by Section 301 forced-labor tariffs of 10 to 12.5 percent covering 60 economies. Importers are therefore simultaneously recovering yesterday’s invalidated duties and paying today’s replacement duties, often on the same products, while modeling whether the replacement regime will survive its own legal tests. The Court of International Trade separately upheld the administration’s elimination of the de minimis exemption for low-value imports in August, confirming that at least some of the President’s IEEPA authority survives in the customs sphere even after the Supreme Court’s tariff ruling.
The compliance to-do list
For companies still working through the process, advisers have distilled the moment into a sequence of concrete actions. Inventory every entry filed between the start of the IEEPA tariffs and the Supreme Court ruling, using ACE entry summaries rather than internal records, since the government’s data controls eligibility. Reconcile importer of record registrations against Form 5106 requirements before the September 18 voiding policy takes effect. Submit or correct CAPE declarations for all eligible entries, and verify ACH banking information even if a declaration was accepted months ago, since transmission failures are surfacing late in the pipeline. For finally liquidated entries, obtain a legal assessment of whether a protective suit at the Court of International Trade is warranted before the Federal Circuit rules. And for entries in the Phase 3 population, assemble the documentation now, including reconciliation filings and post-summary correction records, so that whenever CBP opens the window, the filing is ready the same week.
Finance teams have their own list. Refund receivables should be valued with litigation risk in mind, particularly for unclaimed or Phase 3 amounts. Interest income on refunds is taxable and material for large recipients. And the temporary earnings lift from refunds should be isolated in investor communications, several advisory firms warn, to avoid setting expectations the underlying business cannot meet once the one-time flows subside.
What comes next
Several milestones will define the autumn. CBP owes the Court of International Trade periodic status updates, and the next filings will show whether the Phase 3 delay is a pause or a structural problem. The Federal Circuit’s handling of the government’s appeal is the single largest variable, with the potential to redraw eligibility for a meaningful share of the remaining unpaid pool. And Treasury disbursement pace matters for corporate planning: at roughly 64 percent of the pool certified as of late August, tens of billions of dollars remain queued, and interest continues to accrue at the government’s expense.
For the trade community, the episode is already a case study in what happens when tariff policy moves faster than the institutions that administer it. A duty regime erected by proclamation in 2025 was struck down by the Supreme Court in early 2026, bridged by a temporary statute, replaced by a third authority now in litigation, and unwound through a refund system invented on the fly, all within nineteen months. As one customs attorney observed in a recent client briefing, the refund checks are real, but so is the lesson: in the current era, every tariff dollar paid or reclaimed sits on a foundation that can move.
Importers, brokers, and finance teams that treat customs as a dynamic legal exposure rather than a fixed cost of goods are navigating the moment best. Those waiting for the system to work automatically are learning, 1.7 billion dollars at a time, that it does not.