Major Shipping Carriers Hold Billions in Tariff Refunds, Small Businesses Face Complex Path to Recovery
Major shipping giants FedEx and UPS are either holding or actively pursuing billions of dollars in tariff refunds, a windfall stemming from a federal court ruling that deemed certain emergency tariffs unconstitutional. While these funds are intended for businesses that originally paid the surcharges, the process for small and medium-sized enterprises (SMEs) to reclaim their share is far from straightforward, often routing payments through intermediaries like carriers and brokers rather than directly to the ultimate payers. FedEx has publicly acknowledged approximately $800 million designated for customer refunds, while UPS has disclosed a significantly larger sum, roughly $5 billion, in tariff charges collected from customers, stating its intent to seek refunds on their behalf. The core of the challenge lies in the bureaucratic design of the refund system, where the "Importer of Record" (IOR) — often the carrier or a customs broker — is the primary recipient of these repayments, creating a critical gap between the refund approval and its ultimate arrival in the hands of the small businesses that bore the initial cost.
The Genesis of the Refunds: Unconstitutional Tariffs and Legal Battles
The substantial pool of refundable tariffs originates from duties imposed by the Trump administration starting in 2018, primarily under the authority claimed through the International Emergency Economic Powers Act (IEEPA). These tariffs, initially framed as emergency measures, targeted a wide array of imported goods. However, their legal foundation was later challenged in court, leading to a pivotal finding that certain IEEPA-based tariffs exceeded the statutory authority granted to the executive branch. This legal determination essentially invalidated the collection of these specific duties, triggering the current refund program.
Despite the judicial ruling, U.S. Customs and Border Protection (CBP) continued to collect the contested duties for an extended period, with collections spanning through February 24, 2026. This prolonged collection period means that the refund-eligible window covers several years of imports, encompassing shipments made in 2024 and 2025, during which tariff surcharges were routinely embedded within carrier invoices. The legal precedent for such large-scale tariff disputes is not unprecedented; earlier Section 301 tariffs, also imposed during the Trump administration, faced similar legal challenges and resulted in complex refund and exclusion processes, providing a historical blueprint for the current IEEPA refund cycle. The sheer volume of goods impacted and the duration of the tariff imposition mean that the aggregate value of these refunds is monumental, creating both an opportunity for businesses and a logistical challenge for customs authorities and intermediaries.
CBP’s CAPE System: The Administrative Gateway to Refunds
To manage the massive undertaking of processing these repayments, CBP developed the Consolidated Administration and Processing of Entries (CAPE) system. Housed within its ACE Secure Data Portal, the CAPE system is the designated channel for submitting refund claims. Eligibility to file these claims is restricted to licensed customs brokers or entities officially designated as the Importer of Record (IOR) on the original CBP Form 7501, which is the entry summary filed at the time of import. This IOR designation is the linchpin of the entire refund mechanism and, concurrently, the primary source of complexity for many small businesses.
The system’s design dictates that whoever was named as the IOR on Form 7501 will be the first party to receive the refund, regardless of which business ultimately paid the tariff surcharge. For many small businesses utilizing express shipping services from carriers like FedEx and UPS, the carrier itself often acts as the IOR on behalf of the shipper. This practice is particularly common for shipments near or below the de minimis threshold, where lower-value imports might previously have bypassed formal entry requirements. With the escalation of tariffs in the 2024 to 2025 period, even these seemingly minor shipments became subject to surcharges, often with the carrier assuming the IOR role to streamline customs clearance. The administrative efficiency gained by CBP in channeling refunds through a single designated party, the IOR, inadvertently creates a potential disconnect between the recipient of the funds and the entity that ultimately absorbed the cost.
The Scale of Recovery: Billions at Stake, but Varied Impact for Small Businesses
The overall financial scope of these refunds is staggering. Government estimates indicate that approximately $166 billion in tariff revenue across all IEEPA duty categories could be subject to refund. This figure encompasses importers of all sizes and a vast array of product categories, meaning it’s not a direct projection for small-package express shippers. Nevertheless, it underscores the immense scale of the financial impact. Within this broader pool, initial "Phase 1 CAPE refunds" are anticipated to return more than $1 billion through major carriers, a figure substantiated by public disclosures from FedEx and UPS.
While these aggregate figures paint a picture of substantial recovery, they can be misleading for individual small businesses. A small company that imported $50,000 worth of goods subject to a 25% IEEPA tariff surcharge in 2024 might reasonably anticipate a $12,500 refund. However, the actual amount received could be significantly smaller, influenced by factors such as specific tariff lines, applicable exclusions, the entry status of the goods, and how the carrier or broker allocated charges across multiple shipments. The complexity inherent in international trade logistics means that a direct, dollar-for-dollar refund is not always guaranteed, and the calculation of eligible amounts can be intricate.
The Intermediary Gap: Why Small Shippers Face Hurdles
The primary challenge for small businesses lies in the "intermediary gap." When a small shipper engages a licensed customs broker or utilizes a carrier’s express service, they often sign a Power of Attorney (POA) agreement. This agreement typically grants the broker or carrier the authority to act on the shipper’s behalf in customs matters, including filing entries, handling post-entry claims, and, critically, receiving refunds. Because CBP’s CAPE system restricts refund claims to the IOR, a broker or carrier holding a valid POA is legally positioned to file for, receive, and initially hold the refund.
The obligation for these intermediaries to then remit the money to the actual shipper is generally governed by the terms of their service agreement, rather than by a separate CBP process. This is where many small businesses encounter difficulties. Many have not meticulously reviewed these agreements, which may contain clauses allowing refunds to be applied against outstanding fees, credited to future invoices, or held for a reconciliation period, often spanning 60 to 90 days. Such provisions can legally delay or reduce the amount a shipper ultimately receives, without necessarily constituting a breach of contract. The issue becomes particularly pronounced when a broker receives a single, lump-sum CAPE payment covering entries for numerous customers simultaneously, requiring internal reconciliation processes that may lack transparency for individual shippers.
Expert Guidance and Industry Perspectives
Customs advisory firms are actively guiding importers through this complex landscape. DeMar Consulting Group, a prominent customs advisory firm that has issued guidance on IEEPA refund recovery, strongly advises importers to undertake a thorough review of their records. This includes compiling every entry number from their 2024 and 2025 shipment records, cross-referencing these entries against the IOR named on Form 7501, and verifying whether their broker or carrier has the authority and intention to file the CAPE claim on their behalf. The firm emphasizes that until these steps are completed, small businesses should not treat any potential refund as guaranteed revenue.
The Liberty Justice Center, a public interest law firm involved in the IEEPA tariff litigation, has highlighted that the central concern is not whether refunds will eventually be passed through, but rather the efficiency and transparency of that process. While the firm’s advocacy role in tariff litigation informs its perspective, its warning underscores the potential for delays and complications. Independent customs data has not yet definitively established how frequently individual small shippers fail to receive the money they are owed, but the structural impediments suggest a significant risk.
FedEx and UPS, through their public disclosures, have affirmed their commitment to passing these refunds back to eligible customers. However, the practical details of how this will occur – whether automatically, the expected timeline for pass-through, the audit rights available to individual shippers, and the recourse for businesses whose intermediaries receive funds without their immediate knowledge – remain critical unanswered questions for many small businesses.
Broader Implications and the Call for Proactive Engagement
The recovery gap between large and small importers is largely structural. Large corporations often possess dedicated customs compliance teams, in-house legal counsel, and sophisticated broker contracts that explicitly detail refund pass-through language and timelines. In contrast, small businesses relying on standard express services or third-party logistics providers often depend on these intermediaries to identify, file, and remit refunds without robust contractual enforcement mechanisms tailored to their specific needs. This situation mirrors other common financial oversights that can compound over time for small business owners, leading to preventable revenue leakage.
The time-sensitive nature of refund windows adds another layer of urgency. Shippers who fail to proactively verify their IOR status and contractual terms may find their options limited once carriers and brokers complete their internal reconciliation cycles. Moreover, the landscape is complicated by ongoing litigation. Class-action lawsuits targeting FedEx, UPS, and large retailers like Costco, as reported by Bloomberg Law, frame carriers and intermediaries as potential targets if surcharge savings or refunds are not appropriately returned to customers. The extent to which these legal actions will directly benefit smaller shippers, or if they will primarily remain focused on larger commercial accounts, is still unfolding.
Actionable Steps for Small Shippers
Given the complexities, small businesses cannot afford to wait passively for refunds to materialize. Proactive engagement is paramount. The most effective initial steps involve gathering crucial documentation and understanding contractual obligations:
- Assemble Records: Collect all shipment records from 2024 and 2025, specifically identifying entry numbers for imported goods subject to IEEPA tariffs.
- Verify Importer of Record (IOR): For each entry, ascertain who was listed as the IOR on the CBP Form 7501. This is the critical piece of information determining the initial recipient of the refund.
- Review Contracts: Scrutinize all service agreements and Power of Attorney (POA) documents signed with customs brokers, freight forwarders, and express carriers (FedEx, UPS). Look for clauses pertaining to post-entry claims, refunds, credit applications, offsets, and reconciliation periods.
- Proactive Communication: Initiate contact with the identified IOR (carrier or broker) to inquire about their process for IEEPA refund claims. Ask for clarity on their timeline for filing, expected receipt of funds, and their method for remitting refunds to their customers.
- Understand Potential for Delays/Offsets: Be prepared for the possibility that refunds may be delayed or applied as credits against future invoices or outstanding balances, depending on contractual terms.
- Maintain Diligence: Keep detailed records of all communications and documentation related to the refund process.
The Path Forward: Vigilance in a Complex Landscape
While CBP designed the CAPE refund process for administrative efficiency, centering it around the Importer of Record, it inadvertently creates the potential for a "silent financial loss" for small businesses—a category of revenue leakage that auditors and compliance advisers frequently identify as preventable. The disclosures from FedEx and UPS confirm the existence of substantial refund pools and their stated intention to return these funds to customers. However, these statements do not yet fully address the practical questions that matter most to small businesses: whether refunds will be automatic, the specific duration of the pass-through process, the audit rights available to individual shippers, and the crucial steps to take when a broker or carrier receives money before the company that paid the surcharge is even aware of its existence. Until these operational specifics are clarified and implemented transparently, small businesses must remain vigilant, proactive, and informed to ensure they recover their rightful share of these significant tariff refunds.
