United States Customs and Border Protection (“CBP” or “Customs”) has announced the imminent start of “Phase III” of its “Comprehensive Administration and Processing of Entries” (CAPE) program, which is designed to process applications for refunds of tariffs unlawfully imposed by the President under claimed authority of the International Emergence Economic Powers Act (IEEPA). The United States Supreme Court struck down those tariffs as unlawful and unconstitutional in Learning Resources Inc. v. United States, 607 U.S. ___ (February 20, 2026).

In response, Customs, under supervision of the United States Court of International Trade (CIT) rolled out its CAPE system, which re-writes Customs entries so that they liquidate without regard to IEEPA tariffs, refunding those tariffs to importers. “Phase I” of CAPE processed refunds for entries which were unliquidated or liquidated within the past 80 days (just shy of Customs’ power to “reliquidate” entries up to 90 days after liquidation). “Phase II” of CAPE processed refunds for entries which had been “flagged” for liquidation, but for which reconciliation entries had not yet been filed.

Customs claims that $121 billion in IEEPA tariffs have been processed for refund in CAPE, out of some $166 billion collected.

Customs is now rolling out “CAPE Phase III” – which will process refunds for entries which have been liquidated for more than 80 days. But there are strings attached.

Customs will only process “CAPE Phase III” refunds if a court orders it to do so.  Customs has indicated that it will process CAPE applications for refunds of duties liquidated more than 80 days ago if it receives an order from the United States Court of International Trade directing it to do so. The Court has already issued such orders in more than 3000 of the approximately 5000 IEEPA refund cases presented to it. But these 5000 cases involve a small fraction of the 300,000 importers who paid these taxes.

Importers wishing to obtain CAPE Phase III refunds will need to bring suit in the CIT. Many importers have refrained from filing suit for IEEPA refunds for a variety of reasons, but if they want refunds beyond those granted in CAPE Phases I and II, they will need to file suit. While importers can wait until February 2027 to file suits, most will want to do so sooner than later.

“Offsets” have become a problem. Customs has indicated that in processing CAPE refunds, it will “offset” refunds by other debts importers owe. In many cases, Customs has offset CAPE refunds by various state and federal tax debts, and Customs debts, recorded in the Federal Debt Collection systems. But many, if not all of these offsets appear to be improper. For one thing, the governing statute, 31 U.S.C. § 3701(e) essentially prohibits offsetting other debts against payments arising under “the tariff laws” of the United States. And although Customs’ own offset regulation, 19 U.S.C. §24.72, indicates that Customs duty refunds will be offset only in respect of debts which are “legally fixed and undisputed”, Customs has not been following its own regulation, often offsetting IEEPA refunds to collect on bills which are not final and which are actively being disputed.

CAPE is also glitching on entries subject to certain Section 232 “national security” tariffs. From June 3, 2025 to April 6, 2026, Customs assessed Section 50% Section 232 tariffs against the value of the “steel, aluminum or copper” content of various “derivative articles. The “value of the “steel or aluminum content was declared under one HTS provision and assessed with 50% duty, the “non-steel” or “non-aluminum” value of the articles was reported under a separate tariff subheading and their value was assessed with IEEPA “reciprocal tariffs”.

We have received several reports recently of situations where these entries are processed in CAPE for refunds of the IEEPA “reciprocal tariff”. But then the system writes the “non-steel” and “non-aluminum values out of the entry – and assesses the 50% Section 232 tariffs on the full value of the entry. And, in some cases, the system has “offset” the new Section 232 liability by “offsetting” the IEEPA refunds which would otherwise be given.

Our firm has been active on all these fronts – helping importers file IEEPA refund actions in the CIT, filing motions in the CIT directing IEEPA tariffs be refunded without offsets, and assisting importers in protesting the increased Section 232 tariffs. In separate litigation, Express Fasteners LLC v. United States, we are challenging the imposition of all Section 232 tariffs on “derivative products” imported between June 3, 2025 and April 6, 2026.

CAPE Phase III is not the end-game. Customs has yet to come up with ways to refund IEEPA tariffs on entries which are subject to protests, which are designated in drawback claims, which are subject to antidumping or countervailing duty orders, or which are “informal entries”

Please contact a Neville Peterson professional if you have any questions concerning these issues.