When an importer pays tariffs on eligible entries and later becomes entitled to recover some or all of those duties, accounting for the potential refund revenue can vary. This is an actively debated issue among ABL lenders, private credit funds, sponsors and auditors at this time because the legal right to the refund is established, but the refund timing, final refund amount and accounting treatment are less straightforward. In principle, tariff refunds can boost borrower liquidity, but there is risk in framing them as predictable cash flow.

Refund Timing Variability

On April 20, 2026, Customs and Border Protection (CBP) launched Phase 1 of CAPE (Consolidated Administration and Processing of Entries), the tariff refund request tool in the ACE portal created to process the high volume of refund requests tied to the Emergency Economic Powers Act (IEEPA) tariffs being struck down. CBP’s ACE portal is not inherently complicated, but it is not user friendly and can be challenging for personnel who are not used to working with it. Customs refunds and drawback* claims are often delayed if the information submitted was incomplete, inconsistent or missing, and importers are facing the same challenges with CAPE. While CBP has not yet published formal rejection rates or average processing times, importers describe CAPE processing times as inconsistent. Refunds are typically issued within 60-90 days from CBP acceptance of the CAPE Declaration, unless a compliance concern, like incomplete or incorrect entry data, requires further CBP review.

Refund Amount Variability

Submitting a tariff refund request in CAPE does not necessarily result in a refund. Some requests are rejected, but it is also possible to receive a bill, not a refund, after CAPE processing. CBP removes the tariff, then reprocesses the entry, which gives them the opportunity to review and correct it. This may result in a different amount being owed. If the amount originally paid on the entry is less than the recalculated duty owed, a bill will be issued for the difference. If the recalculated amount is the same or less, a refund will be issued. CBP also checks for any unpaid debts owed by the importer before issuing the refund, so the final amount will be equal to the difference between the IEEPA  duties being refunded and the amount owed on each entry processed.

Accounting Treatment Variability

Many lenders may be reluctant  or unwilling to include expected tariff refunds in EBITDA before receipt due to the variability in refund processing time and the potential CBP adjustments to the expected refund amount mentioned above. For specific clients, or in certain cases, some lenders may consider including the expected refund in EBITDA once it becomes probable and recognized under GAAP, is accepted by the borrower’s auditors, or the refund amount has been approved in CAPE by CBP. Each of those cases represent additional risk to the lender and should be carefully considered. The most common and conservative approach is to recognize the refund as a gain contingency or loss recovery once it is received.

Ownership Risk & Collateral Risk 

ABL lenders also need to determine if there are potential third-party claims to portions of the tariff refunds from customers, suppliers, etc. If the refund claim is sold or assigned at a discount for liquidity, a lien release is needed because the claim is part of the lender’s collateral package.

Practical Approaches in the ABL Market

ABL lenders need to be clear in discussions with potential borrowers that the value of tariff refund claims is based only on unliquidated entries already filed and acknowledged in CAPE.

Borrowing base calculation adjustments to consider:

• Exclude expected refunds from eligible receivables.
• Create a separate Expected Refunds collateral category with low advance rates.
• Require cash receipt before granting collateral value.

Covenant calculation adjustments:

• Do not permit a 2025 EBITDA add-back based on an expected refund.
• Negotiate a one-time “extraordinary item” adjustment with sponsor-backed borrowers.

CAPE - Phase 2

On June 23^rd, CBP announced the launch of Phase 2 functionality will be on June 29, 2026. Phase 1 allowed processing of unliquidated entries and entries within the 90-day voluntary reliquidation period**.  Phase 2 will include entries flagged for reconciliation.***

Why is this important?

Correcting duties on unliquidated entries is administratively simpler and less legally complex because CBP has established statutory authority and processes already in place. For many importers, reconciliation entries are their largest and most complex refund opportunities. For lenders and auditors, the distinction between liquidated and unliquidated entries is important in terms of refund recovery probability:

Based on this, lenders should place a higher value on tariff refund requests against unliquidated entries already accepted by CAPE than on claims related to liquidated entries. With Phase 2 about to launch, a key diligence question going forward will be: “What percentage of the expected refund is tied to unliquidated entries that were eligible for Phase 1 CAPE filing?”

* Drawback is a separate customs refund process that generally allows an importer to recover duties paid on imported goods when those goods, or products made from them, are later exported or destroyed.

** Liquidation constitutes the final assessment of duties on an entry for all purposes, and a voluntary reliquidation within the 90-day period may correct any error in the original liquidation. An unliquidated entry is an import entry where CBP has not yet finalized the duties, taxes, and fees owed. A liquidated entry is one where CBP has finalized that calculation. This matters because refund timing and recovery risk can differ depending on whether the entry is still open or already finalized.

*** A reconciliation entry is a CBP mechanism that allows an importer to create an entry with the best information available at the time of importation while deferring information that cannot be finalized yet. Once the final information is known, the importer files a reconciliation with CBP that reports the actual amounts and pays any additional duties owed or received a refund for overpayment.