Distribution

Manufacturers, distributors and the importing community remain on standby as senior Trump administration officials indicate that they intend to increase the Section 122 tariff rate from 10% to the maximum allowed 15%. On February 20, President Trump announced he would invoke tariffs under Section 122 of the Trade Act of 1974 as a “balance of payments” matter to replace the global and sweeping International Emergency Economic Powers Act (IEEPA) tariffs that just hours earlier the U.S. Supreme Court had ruled illegal. Why did Section 122 replace IEEPA tariffs? Following the Trump administration’s removal of the IEEPA tariffs at midnight ET on February 24, the U.S. immediately implemented 10% Section 122 tariffs starting at 12:01 a.m. that same morning. These Section 122 tariffs, which stand at 10% but are expected to increase to 15% , are scheduled to expire at 12:01 a.m. on July 24, 2026, if not halted earlier through court challenges. The potential rate change, combined with court challenges and an expected expansion of Section 301 tariffs this summer, will require manufacturers and distributors to reexamine the impact of the changing tariff landscape on their operations. In addition to current tariffs imposed under section 232 and section 301, the Trump administration has announced additional investigations under section 232 and section 301, targeting many different U.S. trading partners and goods.   It’s expected that the administration will expedite the Section 301 investigation processes in particular, accelerating the imposing of tariffs as the Section 122 tariffs expire in late July. How do importers claim tariff refunds? If you are the importer of record and have paid IEEPA tariffs since they were imposed in February 2025, you are eligible for refunds of those tariffs. Here are some key points pertaining to the refund process: Use your ACE (automated commercial environment) account to begin the refund process. Within the ACE account, your business will need to create a CAPE (consolidated administration and processing of entries) system. At the end of March, Customs and Border Patrol (CBP) provided an update to the Court of International Trade (CIT) noting that they were more than halfway through the process of finalizing the claim portal, the review/liquidation process, refunds and mass processing. Approximately two-thirds of refunds will be granted during phase one of the refund process. This will apply to all unliquidated IEEPA tariffs paid and IEEPA entries that remain within the 90-day voluntary reliquidation window. For all entries that have been fully liquidated, the CIT has changed its original ruling and will now also manage those in the CAPE system, but in subsequent phases. Issues for businesses that are not the importer of record If you are not the importer of record and, therefore, do not have all or a portion of IEEPA tariffs paid tracked in the ACE system, but you paid IEEPA tariffs to a customer or supplier, keep in mind these considerations: You should still consider seeking refunds, but the process will be far less straightforward. If you worked with a supplier to cover a portion of IEEPA specific tariff costs they paid, you need to review and document the specific IEEPA tariffs you paid and determine what the total tariffs paid were. Note that when calculating total IEEPA tariffs paid, you must exclude any tariffs you took on from your supplier for Section 232 or Section 301 tariffs. Your supplier is likely not obligated to refund you the IEEPA tariffs paid, even after they get refunded via the CAPE portal as the importer of record. As a result, it’s important to talk to your supplier and understand their plan for refunds. Have documentation ready on the IEEPA tariffs you paid to help ensure you are refunded what you are owed after your supplier has been refunded. Read more IEEPA tariff refunds: The recent CIT ruling and Section 122 updates Supreme Court IEEPA tariff ruling released Protecting your manufacturing business amidst tariff changes