U.S. tariff refunds need a ‘strategic approach’ rather than a simple cost issue… “Timing of settlement and objection is key”

As the U.S. Supreme Court ruled that reciprocal tariffs based on the International Emergency Economic Powers Act (IEEPA) are illegal, the market is raising the possibility of tariff refunds worth about $166 billion.

However, despite the possibility of tariff refunds, domestic export companies are often unable to take practical action due to complicated procedures and the burden of hiring local experts.

In particular, as the U.S. Customs and Border Protection (CBP) is expected to operate the refund system (CAPE) around the 20th of this month, the industry's response appears to be expanding beyond simple refund applications to objections and lawsuits.

Myeong Jae-ho, a customs expert at Daeryun Law Firm, explained, “If you check key elements in advance, such as identifying the refund entity, managing the timing of settlement, and designing the refund receipt structure, you can sufficiently increase the possibility of a refund.”

He also added, “We can respond more efficiently by using a domestic law firm that cooperates directly with a local U.S. law firm without an intermediary law firm.”

Commissioner Myeong selected ‘confirmation of the claimant’ as the first factor to be checked in order to receive a tariff refund.

He explained, “About 6,000 companies, or 25% of the approximately 24,000 companies exporting to the U.S., are transacting under DDP conditions in which the exporter bears the cost of customs duties, so there is a possibility that they may be eligible for a refund. Rather than whether a refund is possible, we need to check ‘who can claim it’ first.”

Commissioner Myeong explained that in customs clearance, the U.S. importer (IOR) is often listed as the person paying tariffs, so in reality, there are many structures that make it difficult for Korean companies to directly claim refunds.

In particular, since DDP transactions often have separate cost burden and legal rights, it was emphasized that it is necessary to first review how the burden of tariffs and the attribution of refund rights are established in the contract.

He then explained that it is important to manage schedules before and after ‘tariff settlement (liquidation)’ when proceeding with the refund process.

This is because corrections can be made relatively easily through Post-Summary Correction (PSC) before customs settlement (liquidation), but it becomes difficult to respond if you move to the protest procedure after settlement.

Commissioner Myeong reiterated that 'time management' is more important than anything else because it usually takes about 314 days for settlement, and objections must be raised within 180 days thereafter.

Applying for a refund does not mean ‘automatic payment’. The U.S. Customs and Border Protection (CBP) does not provide automatic lump sum refunds, but presents each procedure based on the taxpayer's application. CBP is only an agency that executes refunds and has no authority to determine whether customs duties are illegal.

Commissioner Myeong added, “Because of this, refunds may only be partially recognized or rejected, and in the event of such a dispute, it is highly likely that it will lead to a lawsuit in the U.S. Court of International Trade (CIT).”

In addition, matters that companies need to prepare practically include securing an import declaration (entry) eligible for a refund, confirming the schedule for calculating and settling customs duties, and registering an account to receive a refund.

Commissioner Myeong added, “Recently, CBP is considering paying refunds only through electronic transfer (ACH),” adding, “If you do not have a U.S. account, a bypass receipt structure through a third-party agent must be prepared in advance.”

Furthermore, he pointed out that companies should keep in mind that the tariff structure itself is recently changing to a 'basic tariff + additional tariff' form.

He said, "In the past, a certain level of tariff was applied regardless of whether FTA was applied, but now, with the shift to the 'basic tariff + additional tariff (10%)' structure, the actual burden varies depending on whether or not FTA is used. Proof of origin is also an important variable. Even for domestic production, it may be difficult to recognize the origin if the core raw materials are imported."

It is also important to note that, separate from the International Emergency Economic Powers Act (IEEPA) tariffs, Article 232 of the Trade Expansion Act and Article 301 of the Trade Act, tariffs, dumping, and countervailing duties (AD/CVD) remain in place. He said, “There is a possibility of introducing additional tariffs based on Section 122 in the future, so there is a need to reorganize the mid- to long-term tariff strategy separately from whether or not to refund.”

Lastly, Commissioner Myeong pointed out, “Tariff refund is not a simple cost issue, but a complex area in which contract structure, customs clearance method, and dispute response are all connected,” and added, “In practice, there is a possibility that CBP will increase the intensity of response by requesting submission of additional data through information request (Form 28) or delaying refund review.”

He continued, “For companies that are not prepared, the refund process may be prolonged or lead to unfavorable results. As the results vary greatly depending on preparation, it is important to approach strategically at the early stage.”

He added, "Tariff refund lawsuits must be filed within two years, and in this case, the final deadline is expected to be around April 2027. If preparations are delayed, rights may not be exercised, so now is the optimal time to prepare a response."

Eunhye Lee (zhses3@joseilbo.com)

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US tariff refund should be a 'strategic approach' rather than a simple cost issue... "Timing for settlement and objection is key" (Shortcut)