Systemic Barriers in US Tariff Refund Process May Leave Billions Unpaid

On April 20, 2026, U.S. Customs and Border Protection flipped the switch on a new electronic portal called CAPE — the Consolidated Administration and Processing of Entries system — designed to return $166 billion in tariffs the Supreme Court had ruled illegal two months earlier [1]. Within six days, importers and brokers had submitted approximately 75,300 declarations covering more than 11.2 million individual entries. Of those, only 1.74 million had cleared all validations [2].

The gap between submissions and approvals tells a familiar story. For decades, the U.S. tariff refund apparatus — encompassing duty drawback, exclusion-based refunds, and protest claims — has operated as a system where the government collects quickly and refunds slowly, if at all. The IEEPA refund crisis has merely thrown an unprecedented spotlight on structural failures that existed long before the Supreme Court's ruling in Learning Resources, Inc. v. Trump.

The Scale of What's Owed

The numbers are staggering. The federal government owes an estimated $166 billion to approximately 330,000 importers who paid duties under the International Emergency Economic Powers Act between March 2025 and February 2026 [3]. The outstanding balance accrues roughly $650 million in interest monthly [4]. CBP has confirmed that about 82% of that total — approximately $127 billion including statutory interest — is eligible for refund in Phase 1 of CAPE processing [4].

But the IEEPA refunds represent only the most visible piece of a larger problem. U.S. companies pay over $100 billion in import duties annually. Industry estimates suggest that while CBP refunds $2–3 billion per year through its duty drawback program, an additional $50 billion in eligible refunds goes unclaimed [5].

Source: US Treasury / CBP Data

Data as of Apr 1, 2026CSV

The surge in tariff collections since 2018 — driven first by Section 301 tariffs on Chinese goods, then by IEEPA tariffs — has compounded the refund backlog without corresponding increases in processing capacity.

Why Refunds Take So Long

CBP promises that valid IEEPA refunds will be issued within 60–90 days of accepting a CAPE Declaration [6]. That timeline already exceeds what many cash-strapped importers can absorb. But for standard duty drawback claims filed outside the IEEPA context, the reality is far worse: without accelerated payment approval, claims routinely take one to three years to process [7]. Section 301 exclusion-based refund claims have historically taken 12 to 24 months or longer [8].

The statutory framework technically requires CBP to process protests within two years and drawback claims within a reasonable period. In practice, "reasonable" has stretched to accommodate whatever pace CBP's understaffed trade processing centers can manage.

Several procedural barriers account for the delays:

Documentation requirements. A drawback claim requires the entry summary, commercial invoice, bill of lading, export proof, and additional shipping papers — all cross-referenced against specific HTS classification codes [5]. Any mismatch between the classification of the imported good and the exported good can trigger denial.

Bond obligations. Importers must maintain customs bonds to file claims, adding cost and complexity that smaller firms often cannot justify for uncertain refund amounts.

Electronic filing errors. CBP's Automated Commercial Environment (ACE) system, through which drawback claims must be filed, generates rejection codes for formatting issues that require resubmission from scratch in some cases.

The 80-day window. For IEEPA refunds specifically, businesses with already-liquidated entries must file within 80 days or permanently lose eligibility [4]. This creates a race against the clock that favors firms with dedicated compliance staff.

Small Business vs. Large Importer: An Uneven Playing Field

The Fortune 500 importers — companies like Costco, FedEx, and major retailers — maintain in-house customs counsel and established broker relationships. They filed CAPE declarations within hours of the portal opening. Small businesses, by contrast, face a structural disadvantage at every stage.

A Federal Reserve survey found that 42% of small firms cite rising tariff costs as a primary financial concern [4]. The average small business paid approximately $306,000 in tariff costs over the past year [4]. Some owners increased lines of credit or took second mortgages while awaiting refunds.

"These are absolutely not automatic refunds," one trade attorney told reporters. "You have to jump through hoops" [4].

The challenges compound for smaller firms:

• No dedicated compliance staff to track legal developments or filing deadlines
• Limited broker access — traditional duty drawback service providers often deprioritize small clients or hand them off to junior staff [9]
• Cash flow constraints that make the 60–90 day minimum wait (and potential multi-year delays for disputed claims) existentially threatening
• Technical portal difficulties — error messages and glitches that larger firms can absorb but that may result in "permanent loss of refund rights" for businesses unable to troubleshoot quickly [4]

Source: CBP / Industry Estimates

Data as of Jan 1, 2026CSV

The gap between duties eligible for drawback and those actually claimed reflects the cumulative weight of these barriers. An estimated $15 billion in eligible drawback refunds goes unclaimed every year specifically because smaller importers lack the resources to navigate the process [9].

The Government's Float

Every day a legitimate refund claim sits unprocessed, the federal government retains use of money it is not legally entitled to keep. With $166 billion in IEEPA refunds alone accruing $650 million monthly in interest, the incentive structure is clear: delay benefits the Treasury.

Since 2018, Section 301 tariffs on Chinese goods have generated an estimated $173 billion in assessed duties [10]. USTR approved roughly 35% of exclusion requests for the initial tariff lists, dropping to 5–7% for Lists 3 and 4 [10]. The vast majority of initially granted exclusions were allowed to expire between 2019 and 2020, meaning importers who relied on those exclusions for continued operations received temporary relief that was quietly withdrawn.

The combination of high collection rates and low refund rates creates what trade attorneys describe as a de facto permanent revenue stream from tariffs that were ostensibly temporary or subject to exemption.

The Steelman Case for Complexity

CBP and trade-law proponents argue that rigorous documentation requirements serve legitimate enforcement purposes. The duty drawback program is susceptible to "double-drawback" fraud — claiming refunds on goods that were never actually exported, or claiming the same export against multiple import entries. The matching requirements between import and export HTS codes exist to prevent this [11].

Domestic manufacturers also have a stake in the system's friction. Drawback refunds effectively reduce the tariff protection that domestic producers receive when competing against imported goods. Every dollar refunded to an importer-exporter is a dollar of tariff protection that disappears from the perspective of a domestic competitor.

CBP has also pointed to resource constraints rather than policy choice as the primary driver of delays. Officials acknowledged to the Court of International Trade that the agency's computer systems "cannot immediately process the massive volume of refunds" [12]. This framing positions delays as a technical problem rather than a structural one.

Critics counter that the technical limitations are themselves a policy choice. CBP has not received significant investment in trade processing technology commensurate with the tariff collections flowing through its systems.

International Comparisons

The U.S. system compares unfavorably to peer nations on multiple dimensions.

Canada: The Canada Border Services Agency targets processing drawback claims within 90 calendar days, with a commitment to meet this standard 90% of the time. In FY 2024–2025, CBSA processed 2,343 drawback claims and met the standard 84.34% of the time [13]. If CBSA fails to issue a refund within 90 days, it automatically pays interest on the balance owed — creating a structural incentive for timely processing that U.S. law lacks for standard drawback claims.

European Union: Under the Union Customs Code, EU member states process duty drawback and remission claims through a framework where goods re-exported within three months qualify for 100% duty refund [14]. While processing times vary by member state, the EU framework provides more standardized timelines and lower documentation burdens than the U.S. system.

Japan: Japan's customs system processes drawback claims through a streamlined electronic filing system with typical turnaround of 30–60 days for standard claims.

The structural difference: other developed nations treat duty refunds as a routine administrative function with binding service standards. The U.S. treats them as an adversarial claims process where the burden of proof falls entirely on the importer.

Legal Remedies and Their Limits

Importers facing denials or delays have pursued several legal channels:

Court of International Trade. Over 2,500 individual IEEPA tariff cases were pending before the CIT as of March 2026 [2]. Judge Richard Eaton ruled that "all importers of record" were "entitled to benefit" from the Supreme Court ruling, not just those who filed lawsuits [15]. However, the government is expected to challenge whether the CIT can issue nationwide refund orders, citing the Supreme Court's decision in Trump v. CASA, Inc. regarding universal injunctions [15].

Administrative protests. The standard pathway requires filing a protest with CBP; if denied, the importer may seek relief at the CIT under 28 U.S.C. § 1581(a) [15]. This multi-step process can take years and requires legal representation most small importers cannot afford.

Legislative action. Senate Democrats introduced the "Tariff Refund Act of 2026," which would require the administration to refund all IEEPA-collected revenue with interest within 180 days, with priority for small businesses [15]. Its prospects in a divided Congress remain uncertain.

Appeals court intervention. An appeals court rejected the Justice Department's request to pause refund processing for 90 days [12], but further government challenges to the scope and timeline of refunds are expected.

The pattern across these remedies: individual importers can sometimes obtain relief through expensive litigation, but systemic reform has proven elusive.

Who Controls the Levers

Decision-making authority over refund timelines sits with CBP's Office of Trade, which oversees the Centers of Excellence and Expertise (CEEs) that process trade transactions. The Executive Assistant Commissioner for Trade — currently a political appointee — sets policy priorities for these centers [16].

CBP employs approximately 28,500 officers across 328 ports of entry [16], but the vast majority focus on border security rather than trade processing. The National Treasury Employees Union reports that CBP's staffing model shows the agency is already short 5,850 officers [16]. While CBP was reportedly spared from DOGE workforce reductions that affected other DHS components [17], it has not received additional trade-processing staff to handle the IEEPA refund surge.

Industry influence flows through several channels. The National Customs Brokers & Forwarders Association of America, the American Association of Exporters and Importers, and major law firms specializing in international trade — including Sandler Travis & Rosenberg and Sidley Austin — have all pushed for streamlined refund processes [8][18]. Whether their advocacy translates into structural reform or merely incremental improvements for their largest clients remains an open question.

What Comes Next

The immediate crisis has a defined shape: $166 billion must be returned, and CBP has built a portal to do it. The deeper problem has no similar solution in sight. The U.S. tariff refund system was designed for an era of lower tariff rates and fewer claims. It has not been redesigned to match the scale of modern trade policy.

Every month the system operates in its current form, money flows in one direction — from importers to the Treasury — far faster and more reliably than it flows back. The businesses that can least afford to wait are the ones who wait longest. And billions in legitimate refund claims will continue to go unfiled, not because they lack merit, but because the system makes claiming them too expensive, too complex, and too uncertain to be worth the effort for those without dedicated trade counsel.

The question is whether the IEEPA crisis — with its $166 billion price tag and Supreme Court mandate — will force the structural reforms that decades of smaller injustices could not.