Tariff Refunds Are Landing. Here's Where a Small Importer Should Put the Money.

Levi Strauss got about $80 million back in tariff refunds this quarter. On its October 7 earnings call, the company said it would put $60 million of that back into the business, and a third of that into distribution and logistics.

That decision is worth copying. If your company imported anything in 2025, you may have a smaller version of the same check on the way. Most of the advice you'll hear about it comes from accountants, and it's good advice: how to book it, what it does to your margin, what the tax treatment looks like. This note is about the other half of the question. Once the money arrives, where should it go?

Why the refunds exist

On February 20, 2026, the Supreme Court ruled in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize tariffs. That wiped out the "reciprocal" and fentanyl-related IEEPA duties collected since 2025. The Court did not set up a refund process, so U.S. Customs and Border Protection built one: a system called CAPE (Consolidated Administration and Processing of Entries) inside the ACE portal.

The scale is large. In a September 17, 2026 declaration to the Court of International Trade, CBP reported that about $134.7 billion in potential refunds had been accepted into CAPE, and about $122 billion, including interest, had been certified and sent to the Treasury for payment. More than 201,000 declarations had been accepted, covering roughly 27.2 million entries.

Two details in that filing matter for a small importer:

• $1.3 billion in refunds was on hold because the importer of record had never given CBP its ACH banking information. That's not a legal problem. It's a paperwork problem, and it's keeping cash out of about 20,000 companies' accounts.
• Phase 3 of CAPE opened October 6, but it's narrow: it covers finally liquidated entries for plaintiffs with court-ordered reliquidation who gave CBP an importer-of-record number by July 30. Most small importers are in the earlier phases, not this one.

Note that the ruling only covers IEEPA. Section 232 tariffs (steel, aluminum, autos) and Section 301 tariffs are still in force, and the 10% Section 122 surcharge that replaced the IEEPA duties from February 24 to July 24 is not refundable through CAPE. If you're not sure which tariffs you paid, your broker's entry summaries will tell you.

Step one: ask your customs broker two questions

Only the importer of record, or its licensed broker, can file in CAPE. So before anything else, ask your broker:

1. Did you file our CAPE declarations? For every entry that paid IEEPA duties, in every phase we're eligible for.
2. Is our ACH refund enrollment complete? This is the step that's holding up $1.3 billion nationwide.

If you sold through a distributor, passed a tariff surcharge on to customers, or had a supplier absorb part of the duty, read those contracts now. Who owns the refund is a contract question, and disputes over it are already showing up.

Step two: decide where the money goes before it lands

A refund is one-time cash. The temptation is to let it fall into the general account, where it quietly covers whatever is short that month. Levi's chose not to do that, and a small company shouldn't either. The better use is to fix the thing that hurt most while the tariffs were in place. For most small importers, that's one of four things.

1. Safety stock on long-lead items

When duties jumped, a lot of companies cut buffer stock to protect cash. That's rational in a squeeze, and expensive afterward: stockouts, expedited freight, and lost orders. Use the refund to rebuild safety stock on the items with the longest lead times and the highest cost of running out. Not everything. Rank items by annual dollar usage, and start with the top of the list.

2. A second supplier

The Federal Reserve's 2026 Report on Employer Firms (a survey of 6,525 small firms) found that among businesses hit with higher costs on foreign inputs, only 13% switched to a domestic supplier and only 8% switched to a different foreign supplier. Most companies raised prices or absorbed the cost. Switching is hard because qualifying a new source takes time and money: samples, a trial order, quality checks, new freight lanes. That is exactly what a one-time cash injection is for. Pick the one or two items where a single supplier failure would stop your business, and qualify a backup.

3. A landed-cost model you can trust

The $800 duty-free de minimis exemption ended on August 29, 2025, for all countries. If you were importing low-value parcels before that date, every one of those shipments now carries duties, fees, and brokerage. A lot of small sellers are still pricing off a cost sheet that predates the change. Build a simple landed-cost model: product cost, inbound freight, duty at the current rate for the HTS code, customs and brokerage fees, and inland delivery. Do it per SKU for your top items. It's a spreadsheet, not software, and it tells you which products are still worth selling.

4. A freight re-bid

Truckload contract rates were up 18% year over year in August 2026, at $2.52 per mile according to ACT Research's analysis of DAT data. Spot rates softened in August after a hot summer, which means this is a reasonable window to go to market: pull twelve months of invoices, check them against your quoted rates and surcharge tables, and re-bid your main lanes while carriers are competing for contract freight again. ACT expects capacity to stay tight for the next 12 to 18 months, so rates locked now will likely look good later.

What this looks like in practice

For a distributor doing $10 to $20 million a year, a refund might be anywhere from a few thousand dollars to a few hundred thousand, depending on what you imported and when. The order of operations is the same at any size:

1. Confirm the filing and the ACH enrollment with your broker this week.
2. Pull the entry summaries and estimate the IEEPA-only portion so you know what's coming.
3. Pick one of the four uses above based on what hurt most in 2025.
4. Put a number on the fix (days of supply added, a second supplier qualified, lanes re-bid) so you can tell at day 90 whether the money did its job.

The refund is temporary. The fix can be permanent.