The US government’s tariff refund portal opened on April 20, and despite widespread doubts, it mostly works. But for fashion and beauty brands now rushing to claim their share of the estimated $166 billion in invalidated IEEPA duties—after a February Supreme Court ruling—the launch of US Customs and Border Protection’s (CBP) new system, called CAPE, marks the start of a much messier phase. Brands now face hidden eligibility gaps, unresolved technical errors, growing legal risks, and a refund process that increasingly favors companies with the resources to handle it.

According to CBP, the first refunds could hit importer accounts as early as May 12. As of April 26, the agency had processed over 11 million entries, with about 1.7 million already liquidated—meaning customs has finalized and closed them—and placed in the refund queue. By these numbers, CAPE is doing what it was designed to do, especially for Phase 1, which only covers certain eligible entries.

“I’m shocked at how easy it is,” says Angela Santos, partner and customs practice leader at Arentfox Schiff, who has been helping clients file since the portal opened. “But I say that with some caveats.”

Read More: How Fashion Is Getting Tariff Refunds
By Jessica Binns

What’s working and what’s not

For well-prepared filers—those with customs lawyers, clean entry data, and existing ACE accounts—the portal process itself is smooth. Uploading a CSV file takes seconds, and approval or rejection follows almost immediately. CBP reports a rough 15% rejection rate across submitted claims—a notable figure even as the agency says the system is running smoothly. Most rejections come from including ineligible entries, not from system failures.

Still, the process is in its early stages. According to the Fragrance Creators Association (FCA) trade group, only 21% of submitted entries had passed validation during CAPE’s first week, with about 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 legal 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 biggest complications aren’t technical failures but structural issues built into the customs system itself. Reconciliation—a customs process used by companies importing from related parties that finalizes product valuation after year-end accounting—has become one of the biggest hidden hurdles in the refund process.

What seems simple on the surface gets much more complicated once companies start 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 large amounts of business data, verifying and validating that data, and ultimately having the right setup—an ACE account or ACH payment mechanism—to make it work.”

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

Wood points to the inequality at play. “Bigger and more financially stable organizations will always have an advantage because they can afford 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 happening in real time. “It’s quickly becoming a ‘get rich or go home’ environment for smaller and mid-sized brands,” she says, describing a system that increasingly favors companies with the internal resources to handle 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 labor, administrative, and filing-related expenses.

This experience has pushed some industry players to take a broader look at their own systems. “The biggest surprise was how operational this process is,” Petersen says. “It’s not just about getting money back — it forces companies to review their entire import history, data structure, and supplier documentation. In many ways, it’s exposing weaknesses in internal systems that weren’t obvious before.”

Irresistible Me, a beauty brand that has also filed through CAPE, describes the reimbursement structure in similar terms. “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?

Behind the headline numbers lies a structural inequality: a large number of big, sophisticated importers are not eligible for Phase 1 refunds — not because of administrative mistakes, but because of how their businesses are set up.

Companies that buy goods from affiliated entities — like a parent company, a subsidiary, or an intercompany supplier — often have to take part in the reconciliation process, which delays 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 regularly source from affiliated manufacturers, this is a core part of how they operate. That means some of the industry’s biggest 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 buy tariff refund claims at steep discounts. As the process has become clearer, those offers have become much more attractive.

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

“If companies can wait a few months, they could get 100% instead of 85% or 90%. But then what happens with Phase 2?”

For Phase 1-eligible entries, with payouts starting this week, many companies are less interested in accepting discounted liquidity. For everyone else, the calculation remains unclear. “It’s sort of a double-edged sword,” Santos says. “If companies can wait 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), describes 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 kinds of resources to spare,” he says.

Consumer exposure and class actions

Brands that raised prices citing tariff costs are now facing a legal theory that was mostly hypothetical six months ago. Class action lawsuits have already been filed against EssilorLuxottica, Costco, and Fabletics, among others, under an unjuHere’s the rewritten version in fluent, natural English:

Enrichment theory: If a company passes tariff costs on to consumers and later gets reimbursed by the government, consumers may be entitled to a share of that money.

Brands that raised prices because of tariffs are now facing a legal idea that was mostly theoretical just six months ago. Class action lawsuits have already been filed against companies like EssilorLuxottica, Costco, and Fabletics.

Santos expects more lawsuits once payments start going out. “It’s still early, because no one has received refunds yet,” she says. “Once the program starts working, especially for companies that publicly said they were passing IEEPA-related costs to consumers, those companies could be at greater risk.”

But the issue is much more complicated than the lawsuits suggest. Brands often absorb some of the costs themselves and apply selective price increases across different products and markets. This makes it hard to figure out exactly what consumers paid in tariff-related charges. “It was very rarely a straight one-to-one pass-through,” Santos says.

The legal team at Withers notes that companies can reduce their legal risk by proactively issuing rebates to customers. But without clear contractual obligations, getting money back after the fact depends heavily on individual agreements. Even if a lawsuit doesn’t succeed, it can still damage a brand’s reputation at a time when consumers are already paying close attention to pricing.

“Even if a class action isn’t successful, there’s usually some kind of settlement,” Santos says. “And the press coverage alone is very damaging.”

Suppliers: The unresolved question

The refund program raises a question that brands and their supply chain partners are just starting to work through: 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 CEO of the FCA. “Companies that built genuine trust with their suppliers — through open communication, clear contracts, and shared problem-solving — are handling the refund question constructively and will come out of this cycle stronger.”

Santos says suppliers are already bringing up the issue. “Some suppliers are going to want a share of the refunds too,” she says. The legal basis is still unclear. Unless contracts specifically mention cost-sharing or renegotiation, brands generally don’t have to pass reimbursements back up the chain.

Some companies are already using the recovery process as part of a broader supply chain strategy. Petersen says Cords Club is using expected reimbursements to renegotiate terms with suppliers, especially those that previously absorbed margin pressure during the tariff period. “It’s being used to think about how we can strengthen resilience among partners in our supply chain,” she says.

Irresistible Me, which plans to renegotiate supplier relationships with more openness about risk-sharing in case of future tariffs, is also being cautious with consumers. “We’re not rushing to lower prices based on uncertain refunds,” Sandu says. “Instead, we’re focusing on value perception through bundles, offers, and positioning.”

Customers mostly don’t understand the complicated details of these trade challenges, she adds: “They just expect fairness.”

A backstop, not a solution

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

Section 122 tariffs have effectively replaced the invalidated IEEPA duties. But that replacement framework is now facing its own legal challenges. Last week, the US Court of International Trade ruled that the temporary 10% global tariffs imposed under section 122 were unlawful, raising the possibility that…Yet another long cycle of appeals, uncertainty, and potential refund claims. Section 301 tariffs are still in place across many product categories, and shipping disruptions from the conflict in Iran are adding more pressure on companies that rely on Gulf shipping routes.

“At the end of the day, refunds are a safety net, not a plan,” Ahmed says. “A refund gets the duties back, but it doesn’t cover the strategic and operational costs that came with them.”

The FCA estimates its members paid over $5.9 billion in tariffs on fragrance-material imports, and the current IEEPA reimbursements only cover a small portion of that. “The real work was stopping the tariffs from happening in the first place,” Ahmed says.

Lamar makes a similar point from the apparel industry. “Even though IEEPA tariffs have been reduced, they’ve basically been replaced by new challenges,” he says. “Many companies might use refunds to offset these ongoing costs or to pay for legal fees they incurred to get what they’re owed.”

For Petersen, the recovery means something more than just a financial adjustment. The jewelry brand is thinking about reinvesting, adjusting product prices, and even re-marketing to existing customers once the duty refunds are actually deposited.

“The real win in this process, for a brand like ours, is the flexibility it gives us,” she says.

Frequently Asked Questions
Here is a list of FAQs about fashion brands facing the real consequences of tariff refunds written in a natural tone with clear answers

BeginnerLevel Questions

1 What exactly is a tariff refund
A tariff refund is when the US government gives back the import taxes a company paid on goodslike clothing or fabricif those goods are later exported out of the country or used to make products that are exported

2 Why are fashion brands suddenly talking about this
Because many brands imported huge amounts of clothing and materials before new higher tariffs were announced Now if they try to export those items to other countries to avoid the high costs they might not get their tariff refunds leaving them stuck with expensive inventory

3 How does a tariff refund normally help a fashion brand
It helps by lowering the cost of doing business globally A brand can import fabric make clothes and then sell them abroad The refund on the import tax makes the final product cheaper and more competitive in foreign markets

4 Whats the real consequence for fashion brands right now
The real consequence is that brands are facing massive cash flow problems They paid high tariffs on imported goods but if they cant get refunds on those tariffs they lose money on every item they export Some are even forced to raise prices or stop selling in certain countries

5 Can a brand just stop exporting to avoid the problem
Not really Many brands have global contracts and retail partners Stopping exports can break agreements hurt their reputation and lead to legal penalties Theyre stuck between paying double costs or breaking promises

AdvancedLevel Questions

6 How do the new tariff refund rules differ from the old ones
Previously refunds were processed quickly if a brand could prove the imported goods were exported within a set time New rules now require stricter proof of physical identitymeaning the exact same item must be exported not just a similar one This is nearly impossible for fashion items that are altered dyed or sold as part of a collection

7 What happens if a brands refund claim is denied
The brand loses the entire tariff amount For a midsized brand that could mean