The Duty Cost Variance Problem: How to Explain IEEPA Tariff Exposure to Finance

Co-Authored with Drew Adler, Product Marketing

There's a meeting happening right now at companies across the country that nobody planned for.

A trade director, someone whose entire career has been spent learning HTS codes, navigating FTZs, and managing customs brokers — is sitting across from a CFO who wants to know one thing: what did this cost us?

Not in regulatory terms. In dollars.

The CFO doesn't want to hear about Chapter 99 modifications or the difference between 9903.01.25. and 9903.01.32. They want a number. They want a variance. They want to know whether the budget is blown or the model still holds.

And here's the uncomfortable truth: most trade teams aren't built to answer that question.

What the IEEPA Tariff Period Actually Cost U.S. Importers

In 2025, the U.S. tariff code was modified more than 50 times, the most in a single year since 2020.

The U.S. Administration invoked the International Emergency Economic Powers Act (IEEPA), a 1977 national security statute, to layer sweeping new import duties on goods from China, Mexico, Canada, and dozens of other countries. These weren't surgical tariff adjustments. They were structural, broad, and issued on short notice.

By mid-December 2025, U.S. Customs and Border Protection had collected IEEPA duties on approximately 34 million entries filed by more than 301,000 importers totaling an estimated $166 billion in duties paid.

That number wasn't in anyone's budget model. Then, in February 2026, the Supreme Court ruled 6-3 that IEEPA does not authorize tariff imposition.

Estimates of the total refund exposure range from $160 to $175 billion depending on the source and reporting date, with CBP building out an automated refund system called CAPE (Consolidated Administration and Processing of Entries) which is expected to launch April 20, 2026.

Hours after the decision, the administration imposed a 10% global surcharge under Section 122, which remains in effect through July 24, 2026, while sweeping new Section 301 investigations are already underway against 16 major trading partners.

For trade directors, the Supreme Court ruling was a vindication. For CFOs, it raises a whole new set of questions.

Why IEEPA Tariff Exposure Is So Hard to Quantify

Here's what makes the IEEPA period so difficult from a cost-reporting perspective: the duty exposure wasn't uniform, and it wasn't static.

Different HTS chapters carried different IEEPA duty rates. Goods from China, Canada, and Mexico were subject to different rate stacks, sometimes layered on top of existing Section 232 or Section 301 duties. Exclusions existed but were product-specific and time-limited. The in-transit provisions meant that entry date, not ship date, was often determinative.

In short: your duty cost variance for any given quarter depended on which products you imported, from where, classified under what HTS codes, and entered on what date.

That's a five-variable problem, and your CFO is asking for a clear one-line answer.

The gap between those two things, the regulatory complexity and the financial summary is where trade directors get stuck. And it's where the conversation with Finance usually breaks down.

What CFOs Actually Want to Know About Tariff Exposure

When a CFO asks about IEEPA tariff exposure, they're usually asking one of three things.

“How much did this cost us that wasn’t in the plan?”

This is the variance question. Finance wants the incremental duty spend attributable to IEEPA segmented by product category, by origin country, by quarter. Not the total duty bill. The delta between what was budgeted under the old duty rate and what was actually paid under IEEPA.

“What does the tariff environment look like going forward?”

This is the scenario planning question. With IEEPA struck down but Section 122 active through July 2026 and Section 301 investigations targeting 16 countries underway, the duty rate environment remains volatile.

Finance wants a low/base/high-cost model, not a legal briefing.

“Are we getting any money back from the IEEPA refunds?”

This is the balance sheet question. With CAPE launching April 20 and CBP preparing to process automated IEEPA duty refunds for unliquidated entries, refund eligibility is now a real financial recovery item.

Critically, only about 6% of affected importers have registered for ACH refunds in the ACE portal, meaning most companies are leaving significant money on the table.

None of these questions require a lawyer to answer. They require a trade team that can speak the language of cost variance and the systems to support it.

How to Build the Duty Cost Variance Number: A 5-Step Methodology

If you're a trade director preparing to present IEEPA tariff exposure to Finance, here's how to structure the analysis in terms that will land.

Step 1: Segment Exposure by HTS Chapter, Not Product Name

Your ERP probably tracks cost by SKU or product line. But duty rate applicability is determined by HTS classification. The first step is mapping your import volume to the specific Chapter 99 IEEPA provisions that applied to each entry — 9903.01.25 for China, separate codes for Canada and Mexico. This is where you discover which product categories were actually hit, and which weren't.

Step 2: Build the Rate Change Timeline

The IEEPA duty rates changed multiple times: February 2025, April 2025, August 2025, and again after the Supreme Court decision in February 2026. A meaningful duty cost variance analysis requires layering your import volume against the applicable rate at the time of entry — not an average annual rate. This is the only way to reach an accurate, defensible number.

Step 3: Isolate IEEPA Exposure from Base Duty Costs

Your total duty spend includes Section 301 (China), Section 232 (steel, aluminum, autos), standard MFN rates, and the now-struck-down IEEPA-specific levies. Finance doesn't need a blended total — they need the incremental IEEPA piece isolated. That's the variance. That's the conversation.

Step 4: Model Three Forward Scenarios

The trade environment isn't stabilizing. Build three forward scenarios for Finance:

• Low case: Current Section 232/301 stack only, Section 122 surcharge expires July 2026

• Base case: Section 122 extended or replaced by Section 301 duties at similar levels

• High case: Escalated Section 301 rates on targeted country/product combinations

Attach a concrete duty cost impact to each scenario for your top import categories by volume.

Step 5: Translate Into Gross Margin Impact

This is the move that earns trade directors a seat at the table. Take your duty cost variance and run it through the P&L. Which product lines had margins compressed? Which supplier contracts need renegotiation? Where is landed cost now outside the model used for pricing decisions? That's the conversation Finance wants — and the one that turns compliance into competitive strategy.

The IEEPA Refund Opportunity Is a Finance Priority, Not Just a Compliance Task

The CAPE refund process launching April 20, 2026 is not just a compliance task for the customs team. It's a cash recovery conversation that needs Finance's involvement.

CBP has made clear that IEEPA duty refunds will be issued electronically through the ACE Portal. Importers of record need to be registered, banking information needs to be on file, and protests need to have been filed to keep entries eligible for recovery.

For companies with significant import volumes, the refund amounts are potentially material — yet only 6% of affected importers have completed ACE portal registration.

The trade team can identify the exposure. But getting the refund across the finish line requires Finance to prioritize it as a recoverable asset, not treat it as a paperwork backlog.

If your company hasn't started this process, the window to act is narrow.

Why the Post-IEEPA Landscape Doesn’t Mean the Problem Goes Away

It's tempting to view the Supreme Court's IEEPA ruling as the end of tariff volatility. It isn't.

The effective U.S. tariff rate went from 2.5% at the start of 2025 to a peak of roughly 27% — then dropped sharply after the Supreme Court ruling.

With IEEPA struck down and replaced by the 10% Section 122 surcharge, the current effective tariff rate sits in the 7–10% range depending on product and origin, down from 13.8% at the pre-ruling peak. That's still meaningfully higher than where companies were planning two years ago.

The administration is running two sweeping Section 301 investigations targeting manufacturing capacity and forced-labor enforcement across dozens of economies, designed to create a durable tariff regime. The Section 122 bridge tariff expires in July 2026, but the tariff pressure it represents isn't going anywhere.

The companies that navigated the IEEPA period well weren't necessarily the ones with the biggest compliance teams. They were the ones that could translate Federal Register complexity into P&L impact — quickly enough to act on it.

That capability — regulatory fluency plus financial modeling plus the systems to connect them — is what defines trade compliance leadership in 2026.

Frequently Asked Questions

What is IEEPA tariff exposure?

IEEPA tariff exposure refers to the additional import duty costs U.S. companies paid under tariffs imposed via the International Emergency Economic Powers Act between 2025 and February 2026. These tariffs were struck down by the Supreme Court in February 2026, and refunds are being processed via CBP's CAPE system.

What is duty cost variance?

Duty cost variance is the difference between the duty costs budgeted in a company's financial model and the actual duty costs paid — often driven by changes in tariff rates, product mix, or country of origin. IEEPA tariffs created significant unplanned duty cost variance for U.S. importers in 2025.

How do I claim an IEEPA tariff refund?

U.S. importers should register for ACH refunds in the CBP ACE Portal and file protests to keep eligible entries open. CBP's CAPE system (Phase 1 launching April 20, 2026) will process automated IEEPA refunds for unliquidated entries.

What tariffs replaced IEEPA after the Supreme Court ruling?

Following the February 20, 2026 ruling, the administration immediately imposed a 10% global surcharge under Section 122 of the Trade Act of 1974, effective February 24, 2026 through July 24, 2026. Section 232 and Section 301 tariffs remain fully in effect. New Section 301 investigations targeting 16 trading partners are underway.

See It In Action: How Sail GTX Builds This Analysis For You

The five steps above are the right framework. The challenge is that doing them manually requires pulling entry data, mapping HTS provisions, building rate timelines, disaggregating duty authority types, running scenario models all of which take weeks and requires expertise most trade teams are stretched too thin to provide.

Sail GTX is built to close that gap. Our platform ingests your import entry data, applies the correct duty rate logic by entry date and HTS classification, and produces the variance analysis your CFO is asking for — segmented by product line, origin country, and tariff authority in a format Finance can actually use.

If you're preparing for that conversation, or already in it, we'd like to show you what your exposure looks like in the platform.

Schedule a 30-Minute Demo →  sailgtx.com

Bring your entry data or let us walk through a live example with your product categories.