Your 10% Surcharge Expired on July 24 — But Your Books Didn't: A Small Importer's Guide to the Section 122 Sunset and the $23.7 Billion in IEEPA Refunds

If you imported anything between early 2025 and February 2026, you probably paid a duty the government now agrees it never had the authority to collect. Then, on February 24, you started paying a different tariff — a flat 10% global surcharge that showed up on every entry summary. On July 24 that surcharge legally expired. You now have money potentially coming back and costs changing again at the same time, and your books are the only place that can keep the two from canceling each other out into confusion.

This is not a trade-policy briefing. It is a bookkeeping and cash-flow field guide for the next 60 days: how to tell what you actually owe now, how to track what you might get back, and how to keep your landed cost, inventory, and tax records coherent when the tariff that replaced the tariff just disappeared and another one took its place.

The Timeline Your General Ledger Needs to Know​

February 2025 to February 2026: The IEEPA Tariffs and the $166 Billion Pile​

For roughly a year, tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were collected on a vast swath of imports. The government collected an estimated $166 billion across about 53 million entries from more than 330,000 businesses. For many small importers, those duties landed as a line item on the CBP entry summary tied to a Chapter 99 Harmonized Tariff Schedule (HTSUS) provision — easy to miss if you relied on your broker's net remittance, but very real in your landed cost.

If those duties inflated your cost of goods sold for inventory you have already sold, or for stock still sitting in your warehouse, they are still embedded in your books.

February 2026: The Supreme Court Holds IEEPA Does Not Authorize Tariffs​

In February 2026 the Supreme Court held that IEEPA does not authorize the President to impose tariffs. The IEEPA tariffs were terminated, and importers who paid them acquired refund rights. The Court's decision did not refund anyone automatically; it created the legal entitlement that Customs and Border Protection (CBP) now has to administer entry by entry.

You do not need to litigate this point. Your job is to prove, entry by entry, what you paid and when it liquidated.

February 24 to July 24, 2026: The 10% Section 122 Bridge​

The same day IEEPA collection stopped, a replacement started: a 10% global import surcharge under Section 122 of the Trade Act of 1974. Section 122 is a balance-of-payments authority that the administration invoked citing fundamental payments imbalances — a $1.2 trillion annual goods trade deficit, a negative primary-income balance, and a net international investment position around negative 90% of GDP at the end of 2025.

Key facts for your calendar and your costs:

• Rate: 10% on products of all countries, on top of any otherwise applicable duty (Section 232 steel/aluminum, existing Section 301, MFN). Limited exclusions applied.
• Effective window: 12:01 a.m. Eastern on February 24, 2026, through 12:01 a.m. Eastern Daylight on July 24, 2026.
• Statutory limit: 150 days. It expires by operation of law unless Congress affirmatively extends it. The administration notified the World Trade Organization under GATT Article XII that the measure took effect February 24 and would expire July 24 absent congressional action.
• Why importers call it a bridge: It was explicitly interim — the replacement of one legal theory with another while longer-term authorities were prepared.

If you imported in that window, your landed cost included an extra 10% you will not pay on entries on or after July 24 — unless a different authority replaces it.

July 24, 2026: The Sunset Lands Exactly as a New Tariff Suite Starts​

The sunset did not create a tariff holiday. It coincided with a new, more durable set of duties:

• New Section 301 duties — July 24, 2026: On June 2, 2026, the U.S. Trade Representative issued findings in 60 Section 301 investigations regarding failures to effectively enforce prohibitions on imports produced with forced labor. Effective July 24, additional Section 301 duties of 10% and 12.5% apply to goods from covered economies. Unlike prior Section 301 lists that targeted specific products, these duties apply broadly across HTSUS Chapters 1–97, with relief through enumerated product and program carve-outs. A narrow in-transit exemption (goods loaded before July 24 and entered by July 28) is already closed for new shipments.
• New Section 338 duties on Canadian goods — August 19, 2026: On July 20, 2026, three proclamations under Section 338 of the Tariff Act of 1930 impose an additional 50% duty on specified Canadian dairy, alcohol, and motor vehicle goods. There is no USMCA carve-out — preferential treatment does not avoid the 50%. Goods already subject to Section 232 are excluded. The vehicle and alcohol annexes sweep in hundreds of tariff classifications far beyond finished cars and bottles, potentially catching parts, components, and related consumables.
• Section 232 tweaks — June 1, 2026: Aluminum, steel, and copper Section 232 duties were adjusted to expand the temporarily reduced 15% rate to additional categories (selected agricultural equipment, residential HVAC products), modify treatment for some mobile industrial equipment, and lower the threshold for products to qualify as made "entirely" from U.S. metal from 95% to 85% by weight — relief for some, but higher documentation burden for all.

Translation: for many origins, the 10% universal surcharge fell off and a 10–12.5% origin-based duty fell on. For Canadian dairy, alcohol, and auto-related SKUs, a separate 50% spike arrives three weeks later. For metal-heavy products, the U.S.-content math changed underneath you.

The $23.7 Billion Refund Is Real — But It Is Not Automatic​

How CAPE Works and Why Phase 1 Misses Many Small Importers​

To manage the scale — CBP processed only about 338,000 refund entries in all of last fiscal year, now facing 53 million — CBP built a new module in its Automated Commercial Environment (ACE) Secure Data Portal called the Consolidated Administration and Processing of Entries (CAPE).

Current guidance, as summarized in June 2026:

• Phase 1 is narrow: Only certain unliquidated entries and entries that liquidated within 80 days before you submit the CAPE Declaration. Once validated, ACE removes the IEEPA Chapter 99 provision and duties on that entry and creates an updated entry summary.
• Scale so far: As of June 5, 2026, CBP reported 181,155 CAPE applications submitted, 125,576 approved, covering about 16.74 million entries. Approved applications represented about $94.94 billion in claimed refunds, of which about $23.68 billion had already been paid as of early June. Internal CBP disclosures described Phase 1 as covering roughly $90 billion of the $166 billion collected, with about $23 billion transmitted to Treasury for refund.
• Who can file: The importer of record (or a broker who actually paid on the importer's behalf) through an ACE portal account, entry by entry. CBP has said it will not accept filings from attorneys on behalf of importers, and the CAPE Declaration must be validated before ACE updates the entry.
• What is still out: CBP estimates that almost 40% of entries with IEEPA duties fall outside CAPE's current technical scope and will require a later phase still under development. Reconciliation entries, drawback-linked entries, and older liquidated entries are common holdouts.

There is also litigation risk. On June 2, 2026 the government appealed the Court of International Trade's refund order to the Federal Circuit, including disputes over eligibility for certain refunds through CAPE. The appeal does not pause Phase 1 processing, but it means the rules for later phases — and for interest — could shift.

What This Means for a Small Business Reading Its Broker Statement​

Open your last three entry summaries (CBP 7501) and look for a Chapter 99 line that flags the IEEPA action. If you see it, you have a record to work from. If you only see a single wire to your broker, ask for the underlying entry-level breakdown: broker statements often net duties, merchandise processing fees, harbor maintenance fees, and broker fees into one number, burying the refund-eligible amount.

You will not get a refund without that entry-level documentation. Start assembling it now: entry number, entry date, liquidation status, HTS classification, country of origin, IEEPA duties paid, and the ACE entry summary version history.

What the Sunset Actually Changes for Your Landed Cost​

This is where most small importers get surprised. The expiration of Section 122 does not lower your costs by 10% in isolation. You have to re-model the stack.

Do the Before-and-After Unit Math​

Take a single SKU. Pull its most recent entry before July 24 and the one you plan for late July:

Before July 24 (example, China-origin widget, HTS 8471.49):

• Supplier FOB: $20.00
• Freight + insurance: $2.50
• Base MFN duty (say 3.1%): $0.62
• Section 122 surcharge (10%): $2.00
• Section 232 steel surcharge if applicable: varies
• Landed cost per unit: $25.12 plus fees
• Your book entry: inventory debited $25.12, duties embedded

After July 24 (same widget, now under new Section 301):

• Supplier FOB: $20.00
• Freight + insurance: $2.50
• Base MFN duty: $0.62
• Section 122: $0.00 (expired)
• New Section 301 (say 10% for that origin/product): $2.00
• Landed cost per unit: still $25.12 — you swapped one 10% for another

If your new Section 301 rate is 12.5% for that economy, your landed cost just rose $0.50 per unit. If your product is in a carve-out, it may have fallen $2.00. If it is a Canadian dairy/alcohol/auto-related SKU after August 19, add another 50% layer.

You cannot price or forecast without that per-SKU recomputation.

Why Chapter-Level Thinking Fails Now​

The new Section 301 duties apply across Chapters 1–97 and grant relief through specific product and program carve-outs, not through a positive list of covered goods. That inverts the old logic. You are covered unless you can prove you are carved out, and the proof is a classification and origin memo plus the annex citation. Many importers who operated comfortably under the flat 10% surcharge — "just add 10% to everything" — now need a product-by-product determination.

Practical steps:

• Export every SKU with its HTS, origin, and trailing-12-month spend. Flag any Canadian dairy, alcohol, or motor-vehicle-related classification against the Section 338 annexes before August 19.
• For each SKU, model three columns: cost under Section 122, cost under new Section 301 (10% vs 12.5% vs carve-out), and cost under any Section 232 overlap. The delta is your margin signal and your negotiation lever with suppliers.
• Update your standard costs in your inventory system on July 24, not at month-end. If you wait, you will ship July 28 orders at a standard that still includes a dead surcharge or misses a new one.

Do Not Forget Section 232's New U.S.-Content Test​

If you import goods that contain aluminum, steel, or copper, the June 1 change from 95% to 85% U.S.-metal content to qualify as "entirely" U.S. origin may move some of your SKUs into or out of the reduced 15% treatment. That determination lives in your bill of materials and origin substantiation, not in a broker's default. The penalty for getting it wrong is not just the duty delta; the June 3 Executive Order on Strengthening Customs Enforcement raised audit expectations and instructed CBP to set a minimum penalty floor for violations within 90 days.

Five Bookkeeping Mistakes That Make a Tariff Change Expensive Twice​

1. Booking Duties as an Operating Expense​

The most common and most damaging habit is posting duties to "Tariff Expense" or "Import Fees" below the gross-profit line. Duties are part of landed cost and belong in cost of goods sold (COGS) — specifically, embedded in inventory cost until you sell:

Beginning inventory + Purchases + Freight-in + Duties (including tariffs) + Other landed costs − Ending inventory = COGS

When you bury duties in operating expenses, your gross margin looks artificially strong, your inventory is understated, and you cannot tell whether a tariff increase or a supplier increase eroded your profit. Put duties where they economically live: in the inventory asset, then in COGS on sale. Your accounting system likely has an "item charge" or "landed cost" feature for exactly this purpose — use it so duties flow to the right SKU, not to a catch-all expense.

2. Not Splitting Inventory Layers by Duty Regime​

If you bought 1,000 units in February under IEEPA at $28 landed and 1,000 units in April under Section 122 at $25 landed, you have two cost layers for the same SKU. If you average them blindly, you will misprice, mismanage reorder points, and — if you get a refund — misstate the recovery.

Use FIFO (or your elected method) faithfully and keep receipt layers tagged with entry date and duty regime. When the IEEPA refund arrives, you will need to know which layer it attaches to and whether that layer has already been sold.

3. Treating an Expected Refund as Income Too Early​

A CAPE submission is not cash. Until CBP validates the CAPE Declaration and ACE updates the entry summary, the refund is a contingent asset. Recognizing it as income on submission overstates assets and invites a painful reversal if the entry is out of scope or the Federal Circuit changes eligibility.

Prudent bookkeeping: track expected refunds off-balance-sheet or in a memo receivable until validated. Only when you have the ACE updated entry summary and a Treasury payment advice do you book it — typically as a reduction of COGS (if the underlying inventory has been sold) or as a reduction of inventory cost (if still on hand), with accrued interest recorded separately as interest income (taxable).

4. Forgetting to Reset Standard Costs and Pricing on July 24​

Many businesses set a standard cost once a quarter and let it ride. If your standard still includes Section 122, every unit you ship after July 24 carries phantom cost, making your sales look less profitable than they are and pushing you to raise prices you may not need to raise. If it misses the new Section 301, the opposite happens — you look profitable until the duty bill reconciles and gross profit collapses.

Recalculate standards effective July 24, publish them to purchasing and sales the same day, and re-run open quotes.

5. Losing Entry-Level Traceability​

The refund and the sunset both reward one discipline: you can tie every general-ledger number back to a CBP entry number, and every entry number forward to a general-ledger number. Importers who wire brokers a lump sum and post "broker payment — $18,430" to a single expense have no path to claim a $2,000 refund on entry 987-6543210-1 or to prove to an auditor that the $2,000 they stopped paying on July 24 was actually Section 122 and not a different duty they still owe.

Build the habit now: every duty payment posts with entry number in the memo, every inventory receipt posts with entry number in the reference, and every refund posts with the CAPE Declaration ID.

How to Reconcile CAPE Refunds in Your Books Without Creating a New Mess​

Decide the Right Home for the Refund​

The accounting follows the economics of what the refund corrects:

• If the refunded duties relate to inventory you have already sold: The duties were already in COGS when the goods sold. The refund is a recovery of that COGS. Book it as a reduction of COGS (a credit to COGS) in the period you have sufficient certainty — typically on validation/payment — not as revenue. Your gross profit for that period will improve, which correctly reflects that prior COGS was overstated by an unlawful duty.
• If the refunded duties relate to inventory still on hand: The duties are still capitalized in inventory. The refund reduces the carrying value of that inventory. Debit your refund receivable and credit inventory (or a landed-cost clearing account) for the duty portion attributable to the on-hand quantity. When those units later sell, COGS will automatically be lower.
• Interest: CBP has indicated refunds will include accrued interest. That portion is interest income, separate from the duty recovery, and taxable as ordinary income.

Split the refund on a per-entry, per-SKU basis. If entry 987-6543210-1 covered two SKUs worth $12,000 and $8,000 with $2,000 in IEEPA duties, allocate the refund proportionally ($1,200 and $800) unless you can trace the duty at the line level — which, if you tagged landed costs correctly at receipt, you can.

A Reconciliation Workflow That Survives an Audit​

Run this monthly until CAPE processing is complete:

1. Export from ACE: Download your entry summary history and CAPE Declaration status. You need entry number, entry date, liquidation date, HTS, IEEPA duties paid, Section 122 duties paid, and current ACE status (unliquidated, liquidated within 80 days, CAPE submitted, validated, updated).
2. Tie to broker payments: Match every ACE duty line to a broker payment in your bank feed. Use the entry number as the match key, not the date or amount. Broker netting hides the split between IEEPA, Section 122, Section 232, and fees.
3. Post with entry discipline: At inventory receipt, debit inventory for each landed-cost component (product, freight, each duty type separately) and credit your customs-payable or cash. Tag each component with HTS and entry number so the later reversal finds the right layer.
4. Track expected refunds in a subledger: Keep a simple table — entry, SKU, quantity on hand vs sold, IEEPA duties embedded, CAPE status, expected refund, validated refund, refund received, interest — and reconcile it to a control account monthly. Do not post expected refunds to the general ledger until validated.
5. On validation/payment: Post the entry referenced above (COGS reduction or inventory reduction plus interest income), clear the subledger, and attach the ACE updated entry summary and the Treasury advice as support. You will need them for your tax return and for the auditor who arrives after the June 3 enforcement order raised CBP's audit cadence.

Tax Timing: The Refund May Reach Back​

If you deducted inflated IEEPA-or-Section-122 duties in a prior year through COGS and now recover them, the recovery is generally taxable in the year received (or when the right becomes fixed), as a reduction of COGS or as other income depending on your method. Interest is taxable when received. If the refund relates to inventory still on hand at year-end, the inventory basis adjustment will flow through in the next sale, not immediately. Talk to your tax advisor before you treat a mid-year CAPE payment as a windfall to spend; part of it may be repaying a prior-year tax benefit.

Your 60-Day Checklist: From ACE Data to Board Decisions​

Do not wait for the next Federal Register notice. If you import at all — even once a quarter — run this before August 19, when the Canadian 50% duties start and the new enforcement posture hardens:

• Inventory your IEEPA exposure: Export every entry from February 2025 to February 23, 2026 with IEEPA Chapter 99 duties. Flag each as CAPE-ready (unliquidated or liquidated within 80 days) vs waiting-for-future-phase. That split drives your cash-flow forecast.
• File or queue CAPE where eligible: Set up your ACE Secure Data Portal account now if you have not. Only the importer of record (or a broker who paid on your behalf) can file. Gather the entry-by-entry support before you start; bulk filing without it fails validation.
• Re-model landed cost by SKU and origin for July 24: For every active SKU, calculate landed cost under three regimes: last Section 122 entry, first post-July-24 entry under new Section 301 (10% vs 12.5% vs carve-out), and any Section 232 overlay. The July 24 vs July 25 delta is your pricing and sourcing signal.
• Re-check Section 232 and Section 338 classification: Re-run bills of material against the June 1 U.S.-content threshold and compare Canadian-origin SKUs against the Section 338 annexes for dairy, alcohol, and motor-vehicle-related goods. The 50% Canadian duties ignore USMCA — do not assume a USMCA certificate protects you.
• Review importer-of-record and bond posture: The June 3 enforcement order raises scrutiny of foreign importers, importer-of-record standards, and bond sufficiency. If you use a nonresident importer or a shared broker bond, confirm the structure will survive heightened vetting and audit.
• Translate numbers into decisions: Sourcing (can a different origin avoid 12.5%?), pricing (do you pass through or absorb the new stack?), purchase timing (did you accelerate inventory into the 10% window that is now gone?), and tax (do repatriated supply-chain changes create transfer-pricing, treaty, or permanent-establishment consequences?).
• Document everything at the entry level: Origin evidence, classification memos, U.S.-content calculations, supplier declarations, and the ACE audit trail. Stronger substantiation is no longer optional; it is the mitigation.

Why Clean Customs Books Are Now a Compliance Asset​

On June 3, 2026 the White House directed the Department of Homeland Security and CBP to revise importer-of-record standards, expand disclosure expectations, increase audits, and revise mitigation standards with a minimum penalty floor within 90 days. In plain language: the same government that is sending you $23 billion back is also telling its auditors to look harder at what you claim next.

Importers who treat customs bookkeeping as a broker's problem will struggle in this environment. Importers who treat it as a core finance discipline — connecting ACE data hygiene to landed-cost modeling, inventory layers, supplier strategy, and governance — will do three things at once: recover cash faster through CAPE, price accurately through the Section 122-to-Section 301 transition, and withstand an audit without scrambling for documents they never kept.

That connection is the real lesson of the last 18 months. Tariff policy has been driven simultaneously by litigation, executive action, agency implementation, and enforcement strategy. The companies entering the second half of 2026 in the best shape are not those that guessed the next proclamation correctly; they are those that built an operating system where a change in a Chapter 99 rate automatically updates a standard cost, a purchase order, a selling price, and a cash forecast — and where a refund automatically credits the inventory layer that actually bore the duty.

You cannot control whether Congress extends a 150-day surcharge or whether the Federal Circuit narrows CAPE eligibility. You can control whether your books tell you, entry by entry, what you paid, what you are owed, and what you will owe next month. Start there.

Simplify Your Financial Management​

As you rebuild landed costs, chase CAPE refunds, and reprice for a new duty stack, maintaining clear, entry-level financial records is essential. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data — version-controlled, auditable, and AI-ready, so every entry number, HTS code, and duty layer stays traceable. Check the docs for how to model inventory and landed costs, or explore Fava to visualize margins by SKU and origin. Get started for free and turn tariff chaos into clean books.