As the U.S. Supreme Court deliberates a pivotal case on President Donald Trump's use of emergency powers to impose tariffs, businesses across the country are watching closely—not just for potential refunds on billions in trade duties, but for the fate of even larger sums tied up in customs bonds and collateral. The ruling, expected no earlier than February 20, 2026, could upend a market that has boomed under the weight of the administration's trade policies, forcing insurance companies to return funds while providing relief to importers strained by escalating costs.
Customs bonds, essentially guarantees that importers will pay required duties and taxes on goods entering the U.S., have seen their values skyrocket since the Trump administration ramped up tariffs under the International Emergency Economic Powers Act (IEEPA). These bonds, issued by specialized surety companies and required by U.S. Customs and Border Protection, cover about 10% of the duties and taxes paid over a rolling 12-month period. As tariffs climbed—from 10% to 25% or higher on certain products—the bond amounts followed suit, jumping from a regulatory minimum of $50,000 to as much as $450 million for some importers.
"With some tariffs increasing from 10%-25% or more for certain products, importers are facing customs bond amounts that now range from the minimum bond amount by regulation of $50,000 to $450 million," said Vincent Moy, international surety leader for Marsh Risk. "We have seen bond increases of upwards of 200%. In one unusual case, a large auto manufacturing client saw its custom bond amount increase by 550%."
Importers purchase these bonds through insurers, paying premiums typically around 1% of the bond limit. The bonds are held by Customs for 314 days without interest, during which duties are reviewed and finalized. Single-entry bonds cover one shipment, while continuous bonds handle multiple imports over a year. The surge in tariffs has not only inflated bond requirements but also led to a flurry of "insufficient notices" from Customs, alerting companies when their bonds fall short.
Jennifer Diaz, a board-certified international attorney at Diaz Trade Law, noted that the number of these notices has quadrupled since 2017, accelerating amid the volatile tariff landscape. "In 2019, insufficiency notices soared because of tariffs related to Section 301 of the Trade Act of 1974," she said. For the January to July 2025 period—the most recent data available from U.S. Customs—insufficiencies totaled nearly $1.5 billion, up from $545.7 million for all of 2024. A November estimate from global shipping firm Western Overseas Corporation pegged the nationwide increase in such notices at nearly 526%.
Trade attorneys advise importers to stay vigilant. "You don't want imports sitting at the ports because your bond doesn't cover the tariffs," Diaz warned. "Importers should speak with their surety and customs broker and ask to be reminded when the bond is about 75% saturated. It usually takes about 10 days for a new bond to be issued, so you don't want your imports to be sitting at the port being charged detention and demurrage fees." According to Diaz, half of the insufficiency notices involve bonds under $100,000, hitting smaller businesses hardest.
To meet these heightened requirements, many companies have had to post additional collateral with insurers, which is held for the full 314-day period. "If companies do not increase their collateral, the goods will be stopped at the port," Moy explained. John Sheppard, executive vice president of insurance brokerage at Shea & Company, which specializes in customs bonds, described the underwriting process as rigorous. "The duties are just so much higher than they've ever been," Sheppard said. "This underwriting process is a complex process involving credit evaluation and the quality of the importer's ability to respond to customs would be. If the surety determines the principal will unlikely be able to meet their obligation under the bond, that is when things like collateral or additional guarantees are brought into play."
The tariff-driven demand has been a boon for surety insurers such as RLI, CNA, Skyward, Chubb, Liberty Mutual, and Palomar Specialty Insurance. Meyer Shields, managing director in property and casualty insurance at KBW, said insurers are profiting from higher premium collections. "Increased customs bond requests offset the slowdown in renewable energy, with both trends driven by government policy," RLI chief operating officer Jen Klobnak remarked during the company's fourth-quarter conference call earlier this month.
Yet the market's growth comes with challenges. Insurers are developing advanced risk modeling tools to handle the larger, more unpredictable liabilities, leading to stricter credit terms and higher premiums for many importers. "Well-capitalized importers will qualify for larger customs bonds, while those with weaker balance sheets may be required to post additional security/collateral with the surety providers, which can put a strain on their liquidity positions," Moy said. The uncertain environment affects a wide range, from capital goods and luxury brands to everyday necessities, prompting companies to work closely with bond brokers to secure financially strong insurers.
Surety experts emphasize that supply meets demand, but the pace is frantic. Moy noted that the volatility impacts operations broadly, with importers navigating a landscape where even routine shipments can trigger bond shortfalls. In some instances, rising import prices combined with tariff hikes have directly caused these insufficiencies, leaving goods in limbo at ports like those in Los Angeles, New York, and Houston—major gateways for U.S. trade.
If the Supreme Court strikes down the IEEPA tariffs as illegal, the implications extend far beyond tariff refunds. Importers could petition insurers to reduce bond amounts and release collateral to levels covering only legitimate duties, taxes, and fees. "If tariffs are refunded, the bond amounts associated with those imports will be allowed to reduce to levels sufficient to cover the duties, taxes, and fees," Moy said. "Companies will need to petition the insurance company that issued the bond for a reduction of the bond and collateral."
For insurers, this would represent a significant revenue hit. "If tariffs are ruled illegal and there are refunds, it would be a revenue headwind," Shields said. "It is a fair amount of work for insurance companies to audit accounts, but the reconciliation process is not new for them. However, the magnitude of trade has grown." Still, Shields views the broader picture positively: "The upside to have freer trade and less uncertainty wins the day. Clarity is more positive than negative," even if it means returning funds.
Complicating matters is the Trump administration's pledge to enact replacement tariffs through other legal channels if the IEEPA measures are invalidated, aiming to maintain similar policy effects. David Craven, counsel to Diaz Trade Law, highlighted the risks for sureties. "The fact that liability has gone up, and Customs is now asking the sureties for collateral ... operations are at risk, and sureties understandably don't want to be caught holding the bag," Craven said. This suggests any refunds could face delays, as insurers verify claims amid ongoing uncertainties.
The Supreme Court delayed its decision before a month-long recess that began earlier this month, pushing the earliest release to February 20. In the event of a ruling against the tariffs, Moy cautioned about administrative hurdles. "Some sureties have collateral return review procedures that can take 30 to 60 days for them to go back to underwriting to review. That's typical," Diaz added. She urged small and medium-sized businesses to proactively request returns from their sureties to expedite the process. "If you are hoping that the collateral will just be returned in due course, the squeaky wheel may make this happen a little bit faster," she said.
The case stems from broader challenges to Trump's trade agenda, including Section 301 actions that have reshaped global supply chains since 2018. Importers from China, Europe, and beyond have adapted by rerouting shipments or absorbing costs, but the bond market's expansion underscores the policy's ripple effects on American commerce. As the court weighs the balance between executive authority and congressional intent, the outcome could stabilize—or further disrupt—an industry already navigating post-pandemic recovery and geopolitical tensions.
Business leaders and trade groups, from the U.S. Chamber of Commerce to manufacturing associations, have voiced support for clarity on tariffs, regardless of the direction. For now, importers continue to monitor their bonds closely, ensuring compliance to avoid costly delays at the nation's ports. The billions at stake highlight how trade policy reverberates through financial markets, tying everyday imports to high-stakes legal battles in Washington.