Tariff Refunds and Product Recall Claims: A New Consideration for Loss Measurement

It wasn’t long ago that I stood in front of our product recall market on April 3, 2025, the day after “liberation day” to discuss the potential impacts we could expect from the newly imposed tariffs. However, who would have thought now I’d be here to talk about the impact of these tariffs being refunded?

The recent surge in tariff refunds have created an emerging issue for insurers, policyholders, and forensic accountants evaluating product recall claims. While much attention has been given to the impact of tariffs on supply chains and manufacturing costs, the growing volume of tariff refunds introduces a new question: how should these refunds affect the measurement of recall-related losses?

Custom and Border Protection’s updated declaration, filed with the Court of International Trade, outlines refund status as follows:

• $166 billion — total IEEPA duties collected (April 2025–February 2026) across ~330,000 importers and ~53 million entries. This is the full refundable pool.
• $121.75 billion — claims accepted for processing as of July 10, up from ~$90 billion in mid-June.
• $104.29 billion — refunds authorized as of the June 29 filing.
• $86.3 billion — actually repaid to importers as of July 10, including statutory interest. Two weeks earlier the figure was $71 billion; two weeks before that, roughly $40 billion.
• ~$130 billion — where analysts expect total refunds to land once all three CAPE phases run their course (before interest).

When a product is recalled, the cost of destroyed inventory, replacement product, and certain recall expenses may include tariffs that were paid when the goods were originally imported. In situations where those tariffs subsequently become refundable, the insured may receive reimbursement from the government for costs that were previously embedded within the claimed loss. As a result, tariff refunds can represent a recovery that reduces the insured’s ultimate economic loss and may need to be considered to avoid duplicate recovery.

However, the analysis does not end there. Although certain historical tariffs may be refunded, manufacturers often continue to face tariff costs on current operations and replacement production. Recent trade developments demonstrate that while some tariff programs were terminated and became subject to refund claims, other tariff mechanisms remain in force and continue to affect imported raw materials and finished goods.

This creates an interesting dynamic in recall claims. A manufacturer may recover tariffs associated with the recalled inventory while simultaneously incurring new tariff costs when sourcing replacement product. The refund reduces the historical cost basis of the recalled goods, but ongoing tariffs may continue to increase replacement costs, supply chain expenses, and business interruption exposures. These are separate economic impacts that should be analyzed independently.

For claims professionals, several key questions become increasingly important:

• Were tariffs included in the claimed inventory or replacement costs?
• Has the insured received, or are they eligible to receive, a tariff refund?
• Are current tariffs affecting the cost of replacement inventory or raw materials?

As tariff policies continue to evolve, claim evaluations will require a more nuanced understanding of both historical and current tariff exposures. The companies most impacted by recalls frequently operate global supply chains where tariffs are embedded throughout the cost structure. Identifying and quantifying tariff refunds, while also recognizing ongoing tariff-related costs, will be critical to ensuring that product recall losses are measured accurately and fairly.

By Brendan Gray

The statements or comments contained within this article are based on the author’s own knowledge and experience and do not necessarily represent those of the firm, other partners, our clients, or other business partners.