IEEPA Tariff Refunds Have Arrived: How to Book Them and Report Them for Tax (Inventory, COGS and Who Gets Paid)

On February 20, 2026, the Supreme Court held in Learning Resources, Inc. v. Trump that IEEPA does not authorize the President to impose tariffs, and IEEPA duties stopped. From April 20, 2026, CBP has processed refunds through the CAPE function in ACE, and only the importer of record (IOR) or the broker that filed the entries can submit. Once the money arrives, book it according to where the goods went: refunds tied to goods still in inventory reduce inventory cost; refunds tied to goods already sold are generally income, or a reduction of cost of goods sold, in the year the refund belongs to; any interest CBP pays is interest income.

Who receives the refund?

Refunds go only to the importer of record, or to a party the importer designates on CBP Form 4811. They do not go to the consignee, the foreign supplier or anyone else in the supply chain who actually bore the duty.

That is why the importer-of-record choice matters. If your U.S. company entered the goods, the refund is yours. If a forwarder or the factory was the importer under delivered-duty-paid terms, the refund is in their name and you can only settle with them under your contract. On direct import to Home Depot, delivered at the export port, Home Depot is usually the importer and the refund is Home Depot's.

How does CAPE work?

According to CBP's notices and guidance from brokers and law firms, you need an ACE Portal account with an importer sub-account, and ACH refund bank details registered in ACE; refunds are not paid without them. You upload a CSV listing the entry numbers on which IEEPA duties were paid, up to 9,999 per file. After validation, ACE removes the IEEPA tariff numbers, recalculates duties, and refunds are consolidated by importer. CAPE opens in phases, and the first phase has eligibility limits; which entries qualify and the deadlines are on CBP's IEEPA refunds page. Your customs broker handles the entries and the refund filing.

How do you book the refund?

Start with where the original duty went. Duties are part of inventory cost: they went into inventory when paid and into cost of goods sold when the goods sold. The refund follows the goods.

Goods still in inventory. The related refund reduces inventory cost, so cost of goods sold is lower when those goods sell.

Goods sold in the same year. The refund reduces that year's cost of goods sold.

Goods sold in an earlier year. The earlier year already deducted the cost, so the refund is generally income in the year it belongs to (or a reduction of that year's cost of goods sold, which produces the same taxable income). Prior-year returns generally aren't amended. This follows the general tax benefit rule: an amount deducted earlier and recovered later is included when recovered.

Interest. CBP may pay interest on refunds of excess duties. Interest is interest income, booked separately, not a cost reduction.

Timing. Cash-method taxpayers generally include the refund when received. Accrual-method taxpayers look at when the right to the refund is fixed and the amount can be determined with reasonable accuracy, commonly when CBP validates the claim and the amount is set. Where that spans year end, decide it with your CPA.

An example

Example (hypothetical numbers, to show the method): a U.S. subsidiary drop-ships lighting for Home Depot and imported the goods itself in 2025, paying $60,000 of IEEPA duties. By the end of 2025, 70% of those goods had sold and 30% were still in inventory. In July 2026 a CAPE refund of $60,000 arrives, with $1,800 of interest.

The 70% already sold corresponds to $42,000. Its cost was in 2025 cost of goods sold, so it is 2026 income (or a reduction of 2026 cost of goods sold). The 30% in inventory at the end of 2025 corresponds to $18,000: if those goods are still on hand in July 2026, it reduces inventory cost; if they sold in the first half of 2026, it reduces 2026 cost of goods sold. The $1,800 is interest income. At the 21% federal corporate rate, the $61,800 ends up adding about $12,978 of federal tax for 2026, with any unsold portion showing up when the goods sell.

What if a forwarder or the factory was the DDP importer?

A DDP price included the duty, but the refund sits with the forwarder or factory. Whether you share in it depends on the contract, for instance a clause on price adjustments or returns when duties change. Anything you receive reduces your purchase cost and is split between inventory and goods sold as above. If the importer is your related company in China, the amount must be arm's length, and a U.S. company 25% or more foreign-owned reports related-party transactions on Form 5472.

If your customer contracts included a tariff surcharge, such as a duty share billed to a retailer, whether part of the refund must go back to the customer depends on the contract; a lawyer should advise on the legal question. Amounts returned to customers reduce revenue.

What records to keep

Keep each shipment's entry summary and duty payment record; the CAPE CSV and CBP's validation and payment records; bank statements showing the ACH deposit; inventory records showing which goods sold in which year and which remain; and contracts and correspondence on duties with forwarders, factories and customers. These support the books and any later IRS or CBP review.

Next steps

Tariff layers, importer choice and entity planning for Home Depot suppliers are in the Home Depot guide; general inventory costing for duties is in the Amazon FBA guide. Book a free 15-minute call or add WeChat YCLUSA.

Sources

Supreme Court of the United States: Learning Resources, Inc. v. Trump (2026-02-20)

CBP: IEEPA Duty Refunds

IRS Publication 538, Accounting Periods and Methods

26 U.S. Code §111 (tax benefit rule)

IRS: Instructions for Form 5472

Last checked: November 9, 2026

This article is general tax information, not tax, legal or customs advice for any individual situation. Refund eligibility and procedures are governed by CBP's latest notices.