CBP pays refunds to the importer of record. But what if your supplier raised prices to cover the tariff — and now they're getting the refund? Here's what importers, retailers, and downstream buyers need to know about the coming wave of refund disputes.
The Supreme Court struck down $175 billion in IEEPA tariffs. Refunds are coming. But a question that almost nobody is talking about is shaping up to be one of the biggest commercial disputes of 2026:
Who actually keeps the money?
U.S. Customs and Border Protection will issue refunds to the importer of record — the entity listed on the entry summary that legally paid the duties to the government. That much is straightforward.
But in the real world, tariff costs don't stay with the importer. Over the past year, those costs flowed downstream. Suppliers added tariff surcharges. Manufacturers raised wholesale prices. Distributors adjusted their cost-plus formulas. By the time IEEPA tariffs reached the end consumer, the economic burden had been passed through multiple parties.
Now that the tariffs have been declared unlawful, the importer of record stands to receive a cash refund for costs it may have already recovered from its customers. Without action from downstream buyers, that windfall stays with the importer.
This is not a hypothetical. It is happening right now.
The Legal Rule: Refunds Go to the Importer of Record
Under 19 C.F.R. § 24.36, CBP issues duty refunds exclusively to the importer of record (IOR) — the entity that filed the entry and paid the duties directly to the government. This is a settled principle of customs law, and the Supreme Court's ruling did not change it.
This means:
- If you are a retailer who bought goods from an importer and paid higher prices because of IEEPA tariffs, CBP will not send you a refund. Your refund rights, if any, are against the importer — not the government.
- If your foreign supplier is listed as the importer of record (which sometimes happens when the supplier manages U.S. customs on your behalf), they are the party with standing to claim the refund from CBP.
- If you used a customs broker and they paid the duties on your behalf, you (as the IOR) are still the one who files for and receives the refund. The broker was acting as your agent.
To confirm who the IOR is on a given entry, check CBP Form 7501 (the entry summary). The IOR is listed in Box 11. If your company's name and IOR number are there, you are the party entitled to the CBP refund.
The Problem: Tariff Costs Were Passed Through
During the IEEPA tariff period, virtually no importer simply absorbed the extra costs. The tariffs were too large — 10% to 145% depending on the country and product — and the margins were too thin.
Instead, importers passed costs downstream through several mechanisms:
Explicit Tariff Surcharges
Many importers added a line-item "tariff surcharge" or "IEEPA duty pass-through" to their invoices. This is the clearest case: the buyer paid a specific amount tied directly to the IEEPA tariff, and both parties documented it as such.
General Price Increases
Other importers raised their overall prices without breaking out the tariff component separately. The buyer paid more, and both parties understood the tariff was a driver — but the increase was embedded in the unit price rather than isolated as a surcharge.
Cost-Plus Arrangements
In cost-plus contracts, the importer's documented costs (including duties) flow directly into the invoice price. The buyer agreed to reimburse the importer's costs plus a margin. Tariffs were part of the cost base.
Negotiated Absorption
In some relationships, the importer and buyer split the tariff impact — the importer absorbed some, the buyer absorbed some. The exact split was negotiated, often informally, and may or may not be documented clearly.
Each of these mechanisms creates a different legal posture when it comes to refund rights.
The Emerging Dispute: Four Scenarios
Scenario 1: Importer Passed Through 100% and Gets 100% Refund
The situation: You are a retailer. Your supplier (the IOR) charged you a 10% tariff surcharge on every invoice for the past year. Now the supplier will receive a full IEEPA refund from CBP — for costs you already reimbursed.
The risk: If you don't assert your rights, the supplier keeps both your surcharge payments and the government refund. That is a double recovery.
Your position: You have strong grounds to demand the refund be passed back. The surcharge was explicitly tied to the IEEPA tariff. If the tariff is refunded, the basis for the surcharge evaporates.
Scenario 2: Importer Raised Prices Generally, No Separate Surcharge
The situation: Your supplier raised prices by 8% in April 2025, citing "increased costs including new tariff obligations." There was no separate tariff line item. Now the supplier will get the IEEPA refund.
The risk: The supplier may argue that the price increase reflected multiple cost factors — not just tariffs — and that the price was a negotiated commercial term, not a tariff reimbursement.
Your position: Weaker than Scenario 1, but not hopeless. If you can show that the price increase correlated directly with the IEEPA tariff implementation — same timing, similar magnitude — courts may infer pass-through. Correspondence referencing tariffs as the reason for the increase is valuable evidence.
Scenario 3: Cost-Plus Contract
The situation: You have a cost-plus agreement with your supplier. Tariff costs were part of the documented cost base that you reimbursed. The supplier will receive the IEEPA refund.
Your position: Very strong. In cost-plus arrangements, the tariff was an identifiable, reimbursed cost. If the cost is refunded to the supplier, the contract's pricing mechanism logically requires a credit or adjustment.
Scenario 4: You Are the Importer of Record
The situation: You imported directly, paid the IEEPA duties to CBP, and raised your own prices to cover them. You will receive the refund from CBP.
Your risk: Your downstream customers — retailers, distributors, end buyers — may demand you pass the refund through to them. If you charged tariff surcharges, those customers have a strong argument. If you simply raised prices, the argument is weaker but still possible.
Legal Theories Downstream Buyers Can Use
If you are a retailer, distributor, or other downstream buyer who bore IEEPA tariff costs, here are the legal theories available to recover your share of the refund:
1. Breach of Contract
If your supply agreement included a tariff pass-through clause, surcharge provision, or cost-adjustment mechanism, the refund may trigger a contractual obligation to credit you. Review your agreements for:
- Language requiring the supplier to "pass through" duty refunds or recoveries
- Price adjustment clauses tied to changes in duty rates
- Most Favored Customer or price parity provisions
- Audit rights that allow you to verify the supplier's cost basis
2. Unjust Enrichment
Even without a specific contract clause, you may have an unjust enrichment claim. The elements are:
- The importer received a benefit (the refund)
- The benefit corresponds to a cost you absorbed (the surcharge or price increase)
- It would be inequitable for the importer to retain both your payment and the government refund
Most U.S. jurisdictions recognize unjust enrichment as a viable claim, though some states require that the contract be silent or ambiguous on the specific issue for equitable relief to apply.
3. Breach of Implied Covenant of Good Faith
Every contract for the sale of goods under UCC Article 2 carries an implied covenant of good faith and fair dealing. If the importer knowingly retains a refund of costs that the buyer paid — particularly where the parties' course of dealing reflected transparent tariff pass-through — there is a compelling argument that keeping the refund without disclosure or credit violates this implied obligation.
4. Restitution and Disgorgement
Where tariff payments functioned as reimbursements based on legal assumptions that were later invalidated (the tariffs were declared unconstitutional), courts may order restitution. This theory applies even in the absence of a formal contract, and focuses on preventing one party from profiting from a legal error.
What Evidence Matters Most
If a refund dispute goes to litigation or arbitration, the outcome will depend heavily on documentation. Here is what matters:
Strongest Evidence for Downstream Buyers
- Invoices with separate tariff surcharge line items. This is the gold standard. If the surcharge was broken out, there is a direct paper trail.
- Written notices from suppliers attributing price increases to IEEPA tariffs. Emails, letters, or formal notices that say "we are increasing prices due to the new tariffs" create a clear record.
- Cost-plus contract terms. If the contract structure requires the buyer to reimburse documented costs including duties, the refund logically flows back.
- Pricing correlation. If prices went up when tariffs were imposed and came down when tariffs were lifted, statistical analysis can demonstrate pass-through even without explicit documentation.
Strongest Evidence for Importers
- Pricing discretion clauses. If the contract gives the supplier broad discretion to set prices without tying them to specific cost inputs, it is harder to argue that tariff refunds must be passed through.
- No separate surcharge. If tariff costs were simply baked into the overall price without being called out, the importer has a stronger argument that the price was a negotiated commercial term.
- Tariff cost was partially absorbed. If the importer can show it absorbed a portion of the tariff without passing it through, this weakens the argument that the full refund belongs to the buyer.
What Companies Should Do Right Now
If You Are a Downstream Buyer (Retailer, Distributor, etc.)
1. Audit your supply agreements. Look for tariff-related pricing provisions, drawback sharing clauses, price adjustment mechanisms, and cost-plus structures. Identify which agreements give you the strongest claim to a share of refunded duties.
2. Preserve your documentation. Gather every invoice with tariff surcharges, every supplier notice referencing IEEPA tariffs, every email thread discussing tariff-related price increases, and every purchase order showing price changes that coincided with tariff implementation.
3. Send a written preservation of rights notice. Contact your key suppliers in writing now — before refunds start flowing. State clearly that you believe you are entitled to a share of any IEEPA tariff refund attributable to goods you purchased, and request that they preserve all records related to IEEPA duties and refund claims.
4. Don't sign refund waivers. Some importers may ask you to sign acknowledgments or waivers as part of ongoing commercial negotiations. Do not sign anything that waives your right to a share of tariff refunds without legal review.
If You Are the Importer of Record
1. Assess your pass-through exposure. Calculate how much of your IEEPA tariff cost was passed downstream through surcharges or price increases. This is the amount that may be subject to contractual or equitable claims from your customers.
2. Review your contracts. Determine whether any supply agreements, distribution agreements, or customer contracts contain provisions that could require you to pass through duty refunds.
3. Set aside refund amounts that may be disputed. If you charged explicit tariff surcharges, assume that some or all of those amounts will need to be returned to customers. Do not treat the full CBP refund as clear profit until the contractual picture is resolved.
4. Be proactive. If you know you passed tariff costs through, consider reaching out to customers before they come to you. Proactive communication builds goodwill and may prevent litigation.
The Contractual Audit Checklist
Whether you are the importer or the downstream buyer, run through this checklist for every material supply relationship:
- Does the contract include a specific tariff pass-through or surcharge clause?
- Does the contract include a price adjustment mechanism tied to duty rate changes?
- Is there a duty drawback or refund sharing provision?
- Were tariff costs invoiced as a separate line item or embedded in unit pricing?
- Did either party send written notice attributing price changes to IEEPA tariffs?
- Is there a cost-plus pricing structure where tariffs were a documented cost component?
- Does the contract include an audit right that covers duty-related costs?
- Are there Most Favored Customer or pricing parity clauses that could be triggered?
The answers to these questions will determine your exposure — on either side of the dispute.
How This Will Play Out
For many companies, the IEEPA refund process will not be a simple CBP filing exercise. It will be a commercial negotiation, and in some cases, a commercial dispute.
The importers who handle this well — proactively communicating with customers, reviewing their contracts, and making good-faith allocations of refund proceeds — will emerge with stronger supplier relationships. The ones who pocket the refunds without regard to pass-through obligations may face breach-of-contract claims, unjust enrichment suits, and damaged business relationships.
The refund money is real. The disputes over who keeps it will be equally real.
TariffLens helps importers track duty exposure and classification accuracy across changing tariff regimes. When every HTS code determination affects your refund eligibility and future duty obligations, accuracy matters. See how TariffLens can help.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Tariff regulations, refund procedures, and contractual rights are evolving rapidly; consult qualified legal counsel before making decisions about refund claims, pass-through obligations, or commercial disputes.