The construction industry has spent the better part of the last year reacting to tariffs primarily as a pricing problem—one that disrupted procurement, strained project budgets, and forced a renewed focus on contract language. But since early 2026, the issue has evolved. Tariffs are no longer just a forward-looking risk to be managed. They are now a backward-looking opportunity and, in many cases, a new source of dispute—centered on who is entitled to recover duties already paid and how future exposure is allocated in an increasingly volatile trade environment.
A Shift From Cost Pressure to Cost Recovery
Advertisement
That shift stems from the Supreme Court’s February 2026 decision in Learning Resources, Inc. v. Trump, which invalidated broad-based tariffs imposed under the International Emergency Economic Powers Act (IEEPA). In response to that decision and subsequent rulings in the U.S. Court of International Trade, U.S. Customs and Border Protection (CBP) has begun implementing a formal refund process for duties collected under that authority, including CBP-administered refund mechanisms for unliquidated entries, administrative protests under 19 U.S.C. § 1514, and, where necessary, litigation before the U.S. Court of International Trade.
For construction stakeholders, this development is significant. Unlike prior tariff cycles, when increased costs were simply absorbed or passed through, the IEEPA unwind creates a pathway to recover cash—often at scale. But that pathway is not automatic. It is procedural, time-sensitive, and dependent on customs posture. Most important, it turns on a question the industry has not historically focused on: Who, exactly, has the legal right to claim the refund?
The Importer of Record Problem
In many construction supply chains, the answer is not straightforward. The importer of record—typically the party that filed the customs entry and paid the duties—is the entity entitled to seek a refund from CBP. That party is often not the general contractor, the developer, or even a first-tier subcontractor. It may be a foreign supplier, a domestic distributor, or a specialty fabricator further upstream.
Yet the economic burden of those tariffs was frequently borne downstream, embedded in contract pricing, change orders, or contingency drawdowns. The result is a growing misalignment between who paid and who can recover—a dynamic that is already beginning to surface in disputes.
Why Traditional Contract Tools Fall Short
This is where the construction industry’s earlier focus on tariff-related contract clauses begins to show its limits. Prior guidance correctly emphasized escalation clauses, force majeure provisions, and Incoterms as tools to manage rising costs. But those tools were largely designed for a unidirectional problem: tariffs increasing prices.
The current environment is bidirectional. Tariffs have been imposed, paid, and, in some cases, invalidated. The question is no longer just how to absorb cost increases—it is how to capture and allocate recoveries.
In many contracts, that issue is simply not addressed. Escalation clauses may allow for upward price adjustments, but they rarely cover whether a contractor must credit the owner if those costs are later reduced through a refund. Procurement terms may define who pays duties at import but remain silent on who benefits if those duties are returned. That silence can create friction, particularly on large-scale projects where tariff exposure runs into the millions of dollars.
Building Refund Rights Into Contracts
Advertisement
Going forward, construction stakeholders may, and perhaps even should, treat tariff refunds as a distinct category of risk allocation. Contracts may expressly address entitlement to duty recoveries, including whether refunds flow to the party that bore the economic burden, the party that filed the entry, or some combination of the two.
Equally important, agreements may, and perhaps even should, include cooperation provisions requiring upstream suppliers to assist in filing refund claims, provide entry documentation, and pass through recovered amounts. Without that alignment, contractors and owners may find themselves dependent on third parties with little incentive to pursue recovery.
Documentation will play a central role in this process. Refund claims require detailed support, including entry summaries (CBP Form 7501), tariff classifications, country-of-origin determinations, and proof of duty payment. For construction firms that historically treated customs compliance as a back-office function, this represents a meaningful shift. The same project documentation discipline that applies to change orders, delays, and defective work must now extend upstream into trade data.
Tariffs Are Still Here
At the same time, it would be a mistake to view the invalidation of IEEPA tariffs as signaling a broader retreat from tariff policy. Other tariff regimes remain firmly in place and, in some cases, have expanded. Duties imposed under Section 232 of the Trade Expansion Act of 1962—particularly on steel and aluminum—continue to apply to many construction imports, alongside other trade measures affecting downstream products.
This creates a dual-track environment for construction procurement. On one front, firms should actively identify and pursue refunds tied to IEEPA duties. On the other front, they must continue to manage ongoing tariff exposure through sourcing strategies, contract structuring, and trade compliance.
That includes evaluating whether materials qualify for preferential treatment under agreements such as the United States-Mexico-Canada Agreement, which can eliminate duties for qualifying goods, and ensuring that tariff classifications are accurate and defensible. Errors in classification or origin can not only increase duty liability but also complicate or foreclose refund opportunities.
A Documentation and Strategy Imperative
The broader lesson is one of alignment. Tariffs, whether imposed or invalidated, expose the seams in construction supply chains—between upstream import activity and downstream project economics, between legal entitlement and financial impact, and between contract language and operational reality.
The IEEPA refund process rewards parties that can trace costs, document payments, and assert claims with precision. It leaves behind those that cannot.
The construction industry is accustomed to managing visible risks—weather events, labor disruptions, site conditions. Tariffs operate differently. They originate outside the project, embed themselves in procurement, and often remain invisible until they surface in pricing or disputes. Today, they also move in reverse, creating opportunities for recovery and exposure.
That opportunity, however, is not self-executing. It requires deliberate action, coordinated documentation, and, increasingly, contractual clarity around who owns the outcome. As the construction industry moves forward, the companies that treat tariffs not just as a cost issue, but as a recoverable asset and an allocable risk, will be better positioned to protect margins and avoid the next round of disputes.
Advertisement
