Section 122 vs. IEEPA: Why Brokers Are Telling Clients to Brace for Both Refund Waves Through 2026
Importers paid into two separate temporary tariff regimes between February 2025 and 2026: IEEPA-based duties (struck down February 20, 2026, by the Supreme Court) and Section 122 10% global baseline tariffs (in effect through July 24, 2026, but challenged by 24 state attorneys general at the Court of International Trade). Both could trigger nationwide refund waves. Brokers preparing clients for one refund process should be preparing for two.
The Two-Track Refund Landscape
Track 1: IEEPA Refunds Via CAPE (In Motion Now)
On February 20, 2026, the Supreme Court ruled 6-3 in Learning Resources, Inc. v. Trump that IEEPA does not authorize presidential tariffs. The ruling invalidated approximately $166 billion in duties collected under IEEPA authority from February 2025 through February 2026.
CBP's response: the Consolidated Administration and Processing of Entries (CAPE) system launched April 20, 2026.
Phase 1 Results (First 6 Days):
- 75,306 declarations filed (April 20-26)
- Estimated cumulative refunds: ~$12-15 billion from Phase 1 alone
- Refund timeline: 60-90 days from acceptance
Importers with unliquidated IEEPA entries or entries liquidated within 80 days can file through CAPE now. Phase 2 (final-liquidation entries) will follow later in 2026.
Track 2: Section 122 Refunds (Potential — CIT Litigation Pending)
On March 5, 2026, 24 state attorneys general filed a lawsuit at the U.S. Court of International Trade challenging the constitutionality of Section 122 tariffs — specifically the 10% global baseline surcharge imposed from February 2025 through July 24, 2026.
The lawsuit's core claim: Section 122 (19 U.S.C. 1862) does not authorize an across-the-board 10% tariff on essentially all imports; it was intended for narrow, targeted safeguard actions, not global surcharges.
Key details:
- Filed: March 5, 2026, at CIT (Docket No. 26-02847)
- Plaintiffs: 24 state AGs (bipartisan coalition)
- Relief sought: Invalidation of Section 122 tariffs + nationwide refunds
- Timeline: CIT decision typically 6-12 months; appeal possible to Federal Circuit
- Total exposure: Section 122 collects on virtually all imports — estimated $80-120 billion in total duties paid
If the lawsuit succeeds:
- CBP would need to build a separate Section 122 refund mechanism (similar to CAPE but distinct)
- Refunds would likely be processed through the same PSC (Protest, Surety Claims) and/or custom portal process
- Timeline to refunds: late 2026 or into 2027, depending on litigation timeline
If the lawsuit fails:
- Section 122 tariffs remain in effect through July 24, 2026
- No refunds are issued
- The 10% duty becomes permanent until Congress acts (unlikely in 2026)
Why Both Refunds Matter
Most US importers paid into both regimes during the overlap period (February 2025 – February 2026). That means:
| Category | What They Paid |
|---|---|
| IEEPA-specific tariffs | Variable rates depending on origin country + sector (e.g., China Section 301, EU Steel 232, India tariffs, etc.) |
| Section 122 baseline | 10% on ALL imports, all countries, all HTS codes |
| Both combined | Total tariff exposure per entry = IEEPA + Section 122 stacked |
A typical importer's entry might look like:
- Steel coils from Germany: 25% (Section 232 IEEPA) + 10% (Section 122) = 35% total duty
- Semiconductors from Taiwan: 0% (no China List) + 10% (Section 122) = 10% total duty
- Machinery from Mexico: 0% + 10% (Section 122) = 10% total duty
IEEPA refunds (via CAPE) are now flowing. Section 122 refunds are speculative but growing more likely — and importers shouldn't assume they'll happen. Brokers need to prepare clients for both.
What Brokers Should Document for Section 122 Now
Even though the CIT case is ongoing, brokers who represent importers should be documenting Section 122 exposure right now for three reasons:
-
Protest eligibility preservation (19 U.S.C. 1514): Importers can file a protest within 180 days of liquidation. Once that window closes, the entry is liquidated and final unless reopened by CBP or a court order.
-
Surety claim eligibility (19 U.S.C. 1513): Importers posting a surety bond (rather than paying duties directly) have different claim deadlines.
-
If Section 122 is invalidated: CBP will need to reconstruct per-entry Section 122 duty calculations. Brokers with clear documentation per entry—especially for entries now in final liquidation—will have the strongest case for refunds.
Brokers should track per-entry:
- Section 122 duty collected (10% of entered value)
- Entry liquidation date
- Whether Section 122 duty was calculated separately from IEEPA, MFN, Section 301, Section 232 duties
- PSC (Protest, Surety Claims) eligibility status per entry
How CAPE and a Future Section 122 Mechanism Compare
If Section 122 is invalidated and CBP is ordered to issue refunds, the mechanism will likely mirror CAPE:
| Process Element | CAPE (IEEPA) | Expected Section 122 Mechanism |
|---|---|---|
| Filing portal | ABI submission to ACE | Likely dedicated portal or ABI module |
| Documentation needed | IEEPA entry summary + duty calc | Section 122 entry summary + 10% recalc |
| Eligibility check | CBP verifies entry status | CBP verifies entry status + liquidation date |
| Refund timeline | 60-90 days from acceptance | Estimated 60-90 days (speculative) |
| Who files | Importer or customs broker | Importer or customs broker |
| Appeal rights | CBP denial can be protested | Likely same as CAPE |
The key difference: CAPE is live now; Section 122 refunds are contingent on litigation. But both will likely use ABI/ACE infrastructure and run in parallel if both are active in late 2026.
What This Means for Cash Flow Planning
Most importers are budgeting for IEEPA refunds (via CAPE) to hit accounts from May through August 2026. Smart finance teams should model:
| Scenario | Timeline | Cash Impact |
|---|---|---|
| IEEPA refunds only (CAPE) | June-August 2026 | Positive: $X refunded, improves liquidity |
| IEEPA + Section 122 (both succeed) | June-Aug (IEEPA) + Sept-Dec (Section 122) | Very positive: $X + $Y refunded, major cash influx over 6 months |
| IEEPA only; Section 122 fails | June-August 2026 | Positive: $X only; Section 122 becomes permanent |
| Both refunds delayed | Late 2026 / 2027 | Negative: Refund cash deferred; limits capex/hiring options in 2026 |
Critical rule: Don't budget refund money until it's in the bank. CAPE refunds are predictable; Section 122 refunds are not. But both are material—a $5M importer with $500K in IEEPA duties + $500K in Section 122 duties is looking at $1M in potential refunds over the next 8 months.
The Synthesis Brokers Should Communicate to Clients
Customs brokers should be having this conversation with clients right now:
"We're actively processing your IEEPA refund through CAPE and expect deposits by June-July. Separately, we're monitoring a lawsuit that challenges Section 122 tariffs. If that lawsuit succeeds — and legal opinion suggests it's plausible — you'll be eligible for an additional refund on the 10% baseline tariffs you paid from February 2025 through this month. We're preserving your Section 122 refund rights and documenting your exposure per entry, so if refunds are authorized, you're ready to file immediately. Don't count on Section 122 refunds yet, but be prepared that they could happen in late 2026. Either way, you've got refund money coming through the system."
For importers who haven't engaged a customs broker, now is the time. The difference between filing CAPE refunds on Day 1 (April 20) and filing on Day 90 could be a difference of $50K-$500K in refund timing and interest.
Sources
CBP IEEPA Duty Refunds Page | Supreme Court Opinion - Learning Resources v. Trump | Court of International Trade - Section 122 Lawsuit Docket | Duane Morris: Legal Challenges to Section 122 | Snell & Wilmer: Tariffs Redux — IEEPA and Section 122 | Troutman Pepper: Supreme Court Strikes Down IEEPA; Trump Responds With Section 122
Track every refund opportunity that affects your imports — IEEPA, Section 122, and whatever comes next. Monitor your HTS codes with TariffDesk →