Your importer clients booked IEEPA surcharges as cost of goods sold. After the Supreme Court struck down those tariffs, some or all of that COGS may convert to a receivable. This is not a speculative tax position — it is a concrete accounting event triggered by a binding judicial ruling. Accounting firms that identify affected clients now capture both a referral opportunity and a billable advisory engagement.
This article walks through the accounting treatment, the identification process, and the dual revenue model. We wrote it for CPAs and advisory partners at firms serving importers, manufacturers, distributors, and retailers with international supply chains.
The Starting Position: IEEPA Surcharges as COGS
Between February 2025 and February 2026, importers paid IEEPA surcharges on goods entering the United States under HTS 9903.01 and 9903.02. These surcharges ranged from 10% to 25% of entered value depending on the product category and executive order tranche.
Most importers booked these surcharges as part of landed cost — COGS or inventory cost, depending on their accounting method. Some allocated surcharges to specific SKUs. Others absorbed them as a general duty increase across product lines. Either way, the surcharge dollars hit the income statement as cost, reducing gross margin and net income.
When the Supreme Court ruled in Learning Resources v. Trump that IEEPA surcharges exceeded presidential authority, CBP confirmed that affected importers could seek refunds through the protest process under 19 U.S.C. §1514. That ruling converted an expense into a potential receivable.
ASC 450-30 Gain Contingency Analysis
Under ASC 450-30 (formerly FAS 5), a gain contingency is recognized when the gain is realized or realizable. Before the Supreme Court ruling, IEEPA refunds were speculative — no basis for recognition. After the ruling, the analysis changes materially.
Is the gain probable? The Supreme Court ruled definitively. CBP issued implementing guidance. The legal basis for refunds is established. For entries within the 180-day protest window, recovery is highly probable — CBP must process valid protests under existing statutory deadlines.
Is the amount estimable? Yes. Entry-by-entry surcharge data is available from CBP’s ACE system via the ES-003 report. The refundable amount equals the surcharges paid on qualifying entries. This is not an estimate requiring judgment — it is a calculable figure derived from customs records.
What about entries outside the 180-day window? These require CIT litigation, which introduces uncertainty in both outcome and timing. The gain contingency analysis for outside-window entries should reflect the probability of litigation success, which is lower than the near-certainty of inside-window protests. A reasonable range estimate may be appropriate for disclosure purposes.
The practical implication: for clients with inside-window entries, the refund may warrant recognition as a receivable on the balance sheet. For clients with outside-window entries, disclosure in the notes to financial statements is appropriate under ASC 450-30.
Consult your firm’s technical accounting resources for specific application, but the analytical framework is clear. This is not an aggressive position — it follows directly from a Supreme Court decision.
COGS Adjustment Mechanics
When a refund is recognized, the corresponding COGS entry requires adjustment. The mechanics depend on when the surcharge was originally recorded and the client’s fiscal year.
Same fiscal year: If the surcharge was booked in the current fiscal year and the refund is recognized in the same year, the adjustment reduces COGS directly. Gross margin increases. The effect flows through to operating income and net income.
Prior fiscal year: If the surcharge was booked in a prior year, the adjustment depends on materiality and the applicable reporting framework. For public companies under SEC rules, a material prior-year adjustment may require restatement. For private companies, the practical approach is typically a current-year adjustment with appropriate disclosure.
Inventory impact: Clients who allocated surcharges to specific inventory items need to trace the adjustment through inventory. For manufacturers who incorporated surcharge-inflated landed costs into work-in-process and finished goods, the inventory revaluation can be complex. This is billable advisory work.
The Interest Component
Under 19 U.S.C. §1505(c), CBP owes interest on refunds of excess duties from the date of deposit. The interest rate is set quarterly by the Treasury Department and has ranged from 4-6% in recent periods.
For a client who paid $400,000 in IEEPA surcharges over 14 months, the interest component adds $16,000-$24,000 to the refund depending on when individual entries were deposited. This is not trivial — and it is a figure your client likely does not know about.
The interest component creates additional accounting considerations. Interest income is recognized separately from the COGS adjustment. It may have different tax treatment. And it is often overlooked by the customs professionals handling the recovery, making it an area where accounting expertise adds distinct value.
The Tax Dimension
The tax treatment of IEEPA refunds depends on the tax benefit rule and the client’s specific circumstances.
Tax benefit rule (IRC §111): If the IEEPA surcharge generated a tax deduction (as part of COGS) in a prior year, the refund may be taxable income in the year received. The analysis turns on whether the deduction actually reduced the client’s tax liability — if the client had net operating losses in the surcharge year, the deduction may not have produced a tax benefit, and the refund may not be taxable.
State tax implications: State treatment of the refund varies by jurisdiction. Some states conform to federal treatment; others have independent rules.
Estimated tax payments: Clients expecting large refunds should factor the tax impact into their quarterly estimated tax payments to avoid underpayment penalties.
This tax analysis is pure advisory work — exactly the kind of value-add that strengthens client relationships and generates fees. Most importers will not think about the tax consequences of their IEEPA refund until their accountant raises it.
Identifying Affected Clients
You do not need ACE access or customs expertise to identify affected clients. You need your own work papers.
Look at the financials. Review the cost of goods sold line item for clients who import from China, Hong Kong, or other countries subject to IEEPA surcharges. If COGS increased materially between Q2 2025 and Q1 2026 relative to import volume, tariff surcharges are likely the cause.
Ask two questions. “Do you import goods from China?” and “Did your landed costs increase in 2025?” If both answers are yes, the client has probable IEEPA exposure. For a faster preliminary screen, direct the client to our free eligibility screening tool, which confirms IEEPA exposure in two minutes.
Check the customs broker. Importer clients have customs brokers. The broker can pull the ES-003 data that quantifies exact surcharge exposure. Alternatively, submit the client for a free assessment and we will quantify the exposure using CBP data.
For clients you identify, provide the estimated exposure as a dollar figure. That number transforms the conversation from abstract (“you might be eligible for something”) to specific (“you have approximately $340,000 in recoverable surcharges, and here is what we need to do”).
The Referral and Advisory Opportunity
Accounting firms operate in two revenue channels on IEEPA recovery.
Channel 1: Referral fees. When you identify a client with IEEPA exposure and refer them into the recovery process, you earn a referral fee on the engagement. This works identically to how customs brokers and freight forwarders earn referrals — you originate the engagement, and you are compensated when it closes.
Channel 2: Advisory fees. The accounting work described in this article — gain contingency analysis, COGS adjustment, interest computation, tax planning — is billed at your standard advisory rates. This is new scope on an existing client relationship, not a separate engagement with a new client.
The dual-channel model is what makes IEEPA recovery particularly attractive for accounting firms. You earn referral income (which requires minimal effort — identify the client and submit for assessment) and advisory income (which requires your professional expertise and generates hours billed at full rates).
A firm with 30 importer clients might find 12-15 with material IEEPA exposure. Referral fees on 12-15 engagements, plus 20-40 advisory hours per client at standard billing rates, creates a meaningful revenue contribution with no business development cost. The clients are already yours.
Timeline for Action
Q1 2026 (now): Screen existing clients during tax season. IEEPA surcharges appear in 2025 financials that you are reviewing right now. Flag affected clients. Submit for assessment.
Q2 2026: Provide gain contingency and tax advisory services to affected clients. Coordinate with clients’ customs brokers on recovery filings. Referral fees begin as engagements are initiated.
Q3-Q4 2026: First protest refunds begin arriving. Provide tax planning for refund receipts. Interest income calculations. Amended return preparation if applicable.
2027: CIT litigation resolutions generate additional refunds. Ongoing advisory work on prior-year adjustments and tax treatment.
The starting point is this quarter’s financial review. The IEEPA line items are in your clients’ data. The referral process takes 10 minutes per client through our assessment page. The advisory work follows naturally. For specifics on the recovery process your clients will go through, visit tariffresolution.com or chinatariffrefund.com.
For clients who need liquidity before the refund arrives, claim assignment through tariffbuyouts.com converts the receivable to cash at closing. For more on how to frame the IEEPA conversation with clients, see our conversation scripts for brokers and forwarders. And for the competitive dynamics driving urgency, read the first-mover advantage analysis.
Do not leave this revenue on the table — or worse, let a competing firm identify the opportunity for your client before you do.
FAQ
Q: Should we recognize the IEEPA refund as a receivable on the balance sheet now, or wait until the refund is received? A: The answer depends on the entry’s protest status and your client’s reporting framework. For entries within the 180-day window where a valid protest has been filed, recognition as a receivable may be appropriate under ASC 450-30 because recovery is both probable and estimable. For entries requiring CIT litigation, the outcome is less certain and disclosure without recognition may be more appropriate. Apply your firm’s materiality thresholds and document the analysis.
Q: Do we need customs law expertise to refer clients into the recovery process? A: No. You need to identify that the client has IEEPA exposure — which you can do from their financial statements — and submit them for assessment. The assessment team handles the customs analysis, entry-level review, and filing strategy. Your expertise comes in on the accounting and tax treatment, which is where your clients need you most.
Q: How do we handle the referral for clients who already have customs brokers handling their recovery? A: Coordinate with the broker. In many cases, the broker handles the protest filing and the accounting firm handles the financial reporting and tax advisory. The referral fee structure accommodates shared referrals. If the broker originated the recovery engagement, your value-add is the advisory work billed directly to the client. If you identified the opportunity before the broker did, the referral fee is yours.