TARIFF REFUNDS
TARIFF REFUNDS
Supreme Court Invalidated Pres. Trump’s Authority To Impose Various Tariffs
While the U.S. Supreme Court’s recent decision invalidating tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) rejected Pres. Trump’s authority to impose those duties, it leaves unresolved a separate and potentially complex issue for businesses: how refunded duties will be allocated among commercial counterparties once repayments are issued.
Refunds from U.S. Customs and Border Protection (“CBP”) will generally be paid to the importer of record, as the party that legally remitted the duties. However, entitlement to retain those refunded amounts will not be determined under customs law. Instead, ownership of refunded IEEPA-related duties will be governed by ordinary principles of commercial contract law. So, please check your contracts.
Across many supply chains, IEEPA tariffs were incorporated into pricing, reimbursed through contractual pass-through mechanisms, or absorbed through negotiated pricing adjustments. As refunds begin to flow, disputes may arise between importers and downstream parties, including distributors, manufacturers, retailers, and others, regarding which entity ultimately should bare the economic burden of the tariffs and whether repayment obligations exist.
Refund Entitlement as a Contractual Determination
Courts resolving refund disputes are likely to focus on the parties’ contractual arrangements rather than economic hindsight or equitable considerations. Where sophisticated commercial entities are involved, the inquiry will center on what was agreed, expressly or implicitly, at the time of the underlying transactions.
In transactions governed by the Uniform Commercial Code (“UCC”) that typically applies to transactions for goods, relevant evidence may extend beyond a single written agreement. Courts may examine the broader commercial record, including:
•Master supply or distribution agreements;
•Purchase orders and acknowledgments;
•Invoices and line-item duty charges;
•Tariff surcharge notices;
•Email communications reflecting pricing negotiations; and
•The parties’ course of performance over time.
Where contracts did not expressly address tariff refunds, which is common, courts may reconstruct the allocation of tariff risk from this collective documentation.
Contractual Provisions Likely to Shape Refund Outcomes
Several categories of contractual language are likely to carry particular weight in refund disputes.
Tariff Pass-Through and Duty Allocation Clauses
Agreements expressly treating tariffs as reimbursable pass-through expenses may support downstream claims that refunded duties must be remitted to the party that funded the payment. By contrast, provisions permitting discretionary price adjustments in response to increased costs may suggest that tariff impacts became embedded in negotiated product pricing rather than preserved as separately recoverable amounts.
Change-in-Law and Regulatory Adjustment Provisions
Contracts authorizing price adjustments due to governmental action may be interpreted differently depending on their structure. Downstream parties may argue such clauses imply reciprocal adjustment once tariffs are invalidated. Importers may contend that these provisions enabled permanent repricing decisions made under then-existing market conditions, without later reconciliation obligations.
Pricing Structure and Surcharge Treatment
Operational pricing mechanics may prove dispositive. Separately itemized duty charges described as temporary surcharges may indicate reimbursement intent. Conversely, revised unit pricing that absorbed tariff exposure without separate identification may evidence renegotiated commercial consideration rather than conditional reimbursement.
Incoterms and Import Risk Allocation
Delivery terms such as Delivered Duty Paid (“DDP”), Free on Board (“FOB”), or Cost, Insurance, and Freight (“CIF”) may provide contextual evidence regarding which party contractually bore import-related risk. Although Incoterms do not independently resolve refund ownership, they may inform the court of the parties’ understanding of tariff risk allocation at the time goods entered U.S. commerce.
Integration, Modification, and Reservation-of-Rights Clauses
Clauses requiring written modifications may limit reliance on informal communications suggesting refund expectations. Conversely, documented reservations of rights or express temporary surcharge language may support arguments that tariff-era pricing adjustments were provisional rather than final commercial settlements.
Potential Claims and Defenses
Downstream purchasers seeking repayment may assert claims including breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, restitution, or other equitable theories. Each theory will depend on demonstrating that tariff payments functioned as reimbursement rather than negotiated price consideration.
Importers may assert defenses grounded in commercial pricing independence, absence of reconciliation obligations, allocation of regulatory risk, course of performance, voluntary payment principles, waiver, estoppel, accord and satisfaction, and integration clause protections. Courts are generally reluctant to impose repayment duties not reflected in agreements negotiated by sophisticated parties.
The Importance of the Commercial Record
In many disputes, the outcome will turn less on headline contractual provisions and more on routine commercial documentation. Invoice descriptions, pricing communications, purchase order exchanges, and the absence or presence of rights reservations may serve as primary evidence of contractual intent. Operational paperwork created during tariff implementation may now define entitlement to refunded duties.
Conclusion
The U.S. Supreme Court’s decision eliminates the legal basis for IEEPA-related tariffs but does not determine how refunded duties will be allocated within private commercial relationships. Customs law dictates who receives repayment from the government. Contract law, informed by pricing structure, risk allocation, and course of performance, will determine who ultimately retains those funds.
For many businesses, the next phase of the IEEPA unwind is likely to resemble a contract dispute rather than a trade compliance matter. While obtaining refunds may be procedural, determining entitlement may require careful review of governing agreements, transactional records, and supply-chain conduct. Please feel free to contact Dawn at dawn@eppscoulson.com if you have any questions.
EPPS & COULSON, LLP
www.eppscoulson.com
www.companiescounsel.com