Retailers receiving refunds of invalidated International Emergency Economic Powers Act (IEEPA) tariffs are not automatically required under federal law to pass those funds on to customers or other downstream buyers. But that does not mean they can safely keep the money. As refunds begin flowing, retailers may face contract-based claims, unjust enrichment theories, and related commercial disputes from parties that previously absorbed tariff costs. With an estimated $160 to $175 billion in duties potentially subject to refund, the question is not only who receives the refund from Customs, but whether downstream parties can claim a right to some portion of it.
The IEEPA's Tariff Regime and The Passthrough Dilemma
On February 1, 2025, the Trump administration invoked emergency authority under IEEPA and imposed extensive import tariffs in response to alleged drug trafficking and trade deficits. The United States Customs and Border Protection subsequently collected approximately $175 billion in tariffs from 330,000 importers. On February 20, 2026, the Supreme Court determined, in Learning Resources, Inc. v. Trump, 146 S.Ct. 628, 224 L.Ed.2d 51 (2026), that IEEPA did not authorize the administration to impose these tariffs. The Court's ruling opened the door to refunds for all IEEPA duties paid between February 4, 2025, and February 24, 2026, although only a subset of those tariffs is being refunded at this time. Notably, Section 232 tariffs on steel, aluminum, and other products were not subject to the litigation and will not be refunded, which adds another layer of complexity to price increases.
Importers passed the IEEPA and other tariffs downstream through explicit tariff surcharges, increased wholesale prices, or embedded cost adjustments. Importers' customers, including other manufacturers, retailers, and consumers, therefore, bore economic burden from the tariffs even though they were not the importer of record. As refunds arrive, customers that paid higher prices are increasingly asserting that importers must return tariff amounts previously recovered, even though full refunds have not been received, and importers may have to litigate to ensure a complete refund.
Are Retailers Legally Required to Pass Refunds to their Customers?
Under United States customs laws, refunds belong to the importer of record and importers are not required to distribute refunds to downstream buyers. However, agreements with tariff adjustment clauses, cost-plus clauses, or true-up provisions may require importers to share refunds. Additionally, customers are testing claims that importers cannot retain refunds for costs already passed through under unjust enrichment theories.
Practical Considerations for Retailers
In anticipation of potential legal claims from customers, retailers should review contracts for tariff adjustment clauses, surcharge provisions, audit rights, and true-up obligations. Retailers should also gather documentation showing how tariff costs – both IEEPA and other increased tariffs – were passed through to their customers; how pricing changed between IEEPA's implementation and invalidation; and all communications exchanged with business partners and customers about tariff impacts. Retailers should assess exposure to customer claims under unjust enrichment and restitution theories and should engage in practice communication with key business partners to reduce disputes and preserve commercial relationships.
Although, legally, there is no requirement that tariff refunds be passed through to customers, courts are increasingly receptive to the argument that importers should not retain refunds for costs already shifted downstream. The combination of customer demands and evolving litigation means importers should take a proactive, document-driven approach to protect refund rights and mitigate downstream conflict.
If you have any questions about IEEPA tariff refunds, downstream pass-through claims, or the potential impact on your business, please contact Marcus M. Maples, Lee Smith, Mya Green, or any member of Baker Donelson's Commercial Litigation team.