The US government’s tariff refund portal opened on April 20, and, against widespread skepticism, mostly works. But for fashion and beauty brands now racing to recover their share of the estimated $166 billion in invalidated International Emergency Economic Powers Act (IEEPA) duties, after a February Supreme Court ruling, the launch of US Customs and Border Protection’s (CBP) Consolidated Administration and Processing of Entries system, known as CAPE, marks the beginning of a far messier phase: navigating hidden eligibility gaps, unresolved technical errors, mounting legal exposure, and a reimbursement process that increasingly favors companies with the infrastructure to survive it.

The first refunds are expected to hit importer accounts as early as May 12, according to CBP. As of April 26, the agency had processed more than 11 million entries, with approximately 1.7 million already liquidated — meaning customs has finalized and closed the entries — and placed into the refund queue. By those measures, CAPE is doing what it was designed to do, especially for Phase 1, which covers only certain eligible entries.

“I am shocked at how easy it is,” says Angela Santos, partner and customs practice leader at Arentfox Schiff, who has been guiding clients through the filing process since the portal opened. “But I say that with some caveats.”

What’s working and what’s not

For well-prepared filers — those with customs counsel, clean entry data, and Automated Commercial Environment (ACE) accounts already in place — the portal process itself is streamlined. Uploading a CSV file takes seconds; approval or rejection follows almost immediately. CBP reports a rough 15% rejection rate across submitted claims — a notable figure even as the agency maintains the system is functioning smoothly — with most rejected submissions stemming from ineligible entries being included rather than outright system failures.

Even so, the process is in its early stages. According to the Fragrance Creators Association (FCA) trade group, only 21% of submitted entries had cleared validation during CAPE’s first week, with roughly 3% reaching the refund stage. Common errors include entries outside the 80-day post-liquidation window — CBP gave itself a 10-day buffer against the 90-day statutory period — as well as entries flagged for reconciliation, drawback programs, or certain anti-dumping and countervailing duty cases.

That distinction matters because some of the most significant complications are not technical failures so much as structural ones embedded in the customs system itself. Reconciliation — a customs mechanism used by companies importing from related parties that finalize product valuation after year-end accounting closes — has emerged as one of the biggest hidden friction points in the recovery process.

What appears straightforward on the surface becomes considerably more complicated once companies begin pulling together the underlying data. “It’s not just ‘uploading a file’,” says Jackson Wood, director of industry strategy for global trade intelligence at Descartes. “The file must be compiled by sifting through significant amounts of business data, verifying and validating that data, and ultimately having the infrastructure set up — ACE account, or Automated Clearing House (ACH) payment mechanism — to facilitate the process.”

That infrastructure requirement is where smaller and mid-sized brands are beginning to hit a wall. ACE accounts — the CBP portal system companies use to access customs data and receive electronic refunds — are currently subject to a months-long backlog, a problem Santos says she warned clients about well before the portal launched.

Wood points to the disparity at play. “Bigger and more financially stable organizations will always have an advantage given their purchasing power and ability to invest in both process and technology infrastructure,” he says. “The IEEPA situation has done little to change that.”

From the brand side, Lexi Petersen, founder and chief creative officer of jewelry brand Cords Club, sees the same divide emerging in real time. “It’s quickly becoming a ‘get rich or go home’ environment for smaller and mid-sized brands,” she says, describing a framework that increasingly rewards companies with the internal infrastructure to navigate it efficiently.

The imbalance is both technological and financial. Julia Hughes, president of the United States Fashion Industry Association, notes that CBP itself estimates the cost of applying for IEEPA tariff refunds at roughly $18.7 million across affected importers, including internal labour, administrative and filing-related expenses.

The experience has forced some industry players into a broader review of their own systems. “The biggest surprise was how operational this process is,” Petersen says. “It’s not just a financial reclaim — it forces companies to audit their entire import history, data structure, and supplier documentation. In many ways, it’s exposing weaknesses in internal systems that weren’t visible before.”

Irresistible Me, a beauty brand that has also filed through CAPE, describes the reimbursement structure similarly. “It isn’t technically difficult,” says Dona-Maria Sandu, supply chain manager at Irresistible Me, “but it is time-consuming and requires tight coordination between finance, supply chain, and external customs advisors.”

Who can’t get to Phase 1?

Beneath the headline figures lies a structural inequity: a significant portion of large, sophisticated importers are ineligible for Phase 1 refunds; not because of administrative failings, but because of how their businesses are organized.

Companies that purchase goods from affiliated entities — a parent company, a subsidiary, or an intercompany supplier — are often required to participate in the reconciliation process, which defers final customs valuation until financials are closed after year-end. Those entries are explicitly excluded from CAPE Phase 1. For luxury conglomerates and global fashion groups that routinely source from affiliated manufacturers, this is a core feature of their business models. That means some of the industry’s largest importers — and largest refund claimants — are now facing a multi-phase recovery process with no confirmed timeline for later phases, says Santos.

The uncertainty has also kept the hedge fund proposition alive. Before CAPE launched, financial firms aggressively approached importers, offering to purchase tariff refund claims at steep discounts. As certainty around the process has improved, those offers have become materially more attractive.

“The prices have gone up between 85 and 90 cents on the dollar,” Santos says. “But companies also have to pay their own administrative fees in terms of securing the refunds.”

For Phase 1-eligible entries, with payouts beginning this week, many companies have become less interested in accepting discounted liquidity. For everyone else, the calculus remains unresolved. “It’s sort of a double-edged sword,” Santos says. “If companies can wait it out for a few months, they could get 100% instead of 85% or 90%. But then what happens with Phase 2?”

Steve Lamar, president and CEO of the American Apparel & Footwear Association (AAFA), frames the burden in terms of resources. “The process will continue to require significant time and labor, which will disproportionately impact smaller businesses that are less likely to have these types of resources to spare,” he says.

Consumer exposure and class actions

Brands that raised prices citing tariff costs are now confronting a legal theory that was largely hypothetical six months ago. Class action lawsuits have already been filed against EssilorLuxottica, Costco, and Fabletics, among others, under an unjust enrichment theory: if a company passes tariff costs to consumers, and later receives a government reimbursement, consumers may be entitled to a share in the recovery.

Santos expects litigation to increase once payments begin flowing. “It’s preliminary right now, because nobody has received refunds yet,” she says. “Once this program starts working, particularly for companies that publicly said they were passing IEEPA-related costs onto consumers, those companies may be more at risk.”

The issue, however, is far less straightforward than the lawsuits suggest. Brands often absorb part of the costs themselves, while applying selective increases across products and markets, making it difficult to isolate what consumers specifically paid in tariff-related subsidies. “It was very rarely a one-to-one pass-through,” Santos says.

The Withers legal team notes that companies can reduce legal exposure by proactively issuing rebates to customers, though absent explicit contractual obligations and retrospective recovery remains highly dependent on individual agreements. Even unsuccessful litigation could create reputational fallout at a moment when brands are already navigating heightened consumer scrutiny around pricing.

“Even if a class action is not successful, there’s usually some kind of settlement,” Santos says. “And the press itself is very bad.”

Suppliers: The unresolved question

The refund program raises a question that brands and their supply chain partners are only beginning to negotiate: who benefits when money flows back through a value chain that absorbed costs on the way down?

“This moment has become a stress test for business relationships,” says Farah K. Ahmed, president and chief executive of the FCA. “Companies that built genuine trust with their suppliers — through transparent communication, clear contracts, and shared problem-solving — are navigating the refund question constructively and will come out of this cycle stronger.”

Santos says suppliers are already raising the issue. “Some suppliers are going to want to share in the refunds as well,” she says. The legal footing remains murky. Unless contracts explicitly provide for cost-sharing or renegotiation, brands are generally not obligated to pass reimbursements upstream.

Some companies are already treating the recovery process as part of a broader supply chain strategy. Petersen says Cords Club is using anticipated reimbursements to renegotiate supplier terms, particularly with partners that previously absorbed margin pressure during the tariff cycle. “It’s being used to strategize around how we can strengthen resiliency among partners within our supply chain,” she says.

Irresistible Me, which plans to renegotiate supplier relationships with greater openness around risk-sharing in the event of future tariff developments, says it is taking a similarly cautious approach with consumers. “We’re not rushing to reduce prices based on uncertain refunds,” Sandu says. “Instead, we’re focusing on value perception through bundles, offers, and positioning.”

Customers largely don’t understand the murky nuances involved with these trade challenges, she adds: “They just expect fairness.”

A backstop, not a resolution

CAPE, for all the operational progress it represents, is arriving in a trade environment that remains deeply unstable.

Section 122 tariffs have effectively replaced the invalidated IEEPA duties. But that replacement framework is now facing legal jeopardy of its own after the US Court of International Trade ruled last week that the temporary 10% global tariffs imposed under section 122 were unlawful, raising the possibility of yet another prolonged cycle of appeals, uncertainty and potential reimbursement claims. Section 301 measures remain active across broad product categories, while shipping disruptions linked to the conflict in Iran continue to create additional pressure for companies dependent on Gulf shipping routes.

“At the end of the day, refunds are a backstop, not a strategy,” Ahmed says. “A refund recovers the duties; it does not recover the associated strategic and operational costs.”

The FCA estimates its members paid more than $5.9 billion in tariffs on fragrance-material imports, of which the current IEEPA reimbursements represent only a fraction. “The consequential work was preventing the tariffs in the first place,” Ahmed says.

Lamar makes a similar argument from the apparel sector. “While IEEPA tariffs have been rolled back, they’ve effectively been replaced by new pressures,” he says. “Many companies may use refund relief to offset these continued costs or to cover legal expenses incurred to secure what they’re owed.”

For Petersen, the recovery represents something more fundamental than a line item, as the jewelry brand considers reinvesting, repricing products, and even remarketing to existing customers once the duty refunds are actually deposited.

“The victory in this process, for a brand like ours, is the optionality it affords us,” she says.