UPS Flags $5B in Tariff Refunds, Holds Outlook Despite Fuel Volatility

CEO Carol Tomé says refunds will flow back to customers as soon as funds arrive, while fuel surcharges tied to Iran war constraints lift revenue but not profit.​CEO Carol Tomé says refunds will flow back to customers as soon as funds arrive, while fuel surcharges tied to Iran war constraints lift revenue but not profit. 

UPS says it expects to eventually pass along over $5 billion in tariff refunds to its customers once it receives those funds from the United States government.

The company has been working with U.S. Customs & Border Protection (CBP) as it preps to disperse tariff refunds months after the Supreme Court struck down the International Emergency Economic Powers Act (IEEPA) tariffs in February.

On a Tuesday morning earnings call, CEO Carol Tomé said the company is currently applying for just under $500 million in refunds across 2.5 million entities, covering tariffs levied earlier this year. That’s a sliver of the applications expected after the CBP’s first phase of the tariff refund process concludes. Since “Liberation Day,” UPS has processed 16 million IEEPA-related entries.

“We are just a pass-through. We collect, and we remit to the government. Our approach is to work with the U.S. government and not to sue the U.S. government,” said Tomé, in a veiled reference to chief rival FedEx, which filed a lawsuit against the federal government and the CBP for a full refund after the Supreme Court ruling. “We think it’s going to take some time before the Treasury remits money to us, but as soon as we get that money, we are going to remit it right back to our customer.”

CBP said most importers will receive their refunds within 60 to 90 days of approval.

As for the parcel delivery firm’s business operations, UPS says Iran war-driven fuel surcharges have not had a material impact on its first quarter, with the courier leaving its current full-year guidance unchanged.

“Clearly there’s a benefit right now to the top line, not so much on the bottom line because we’re just covering our costs,” said Tomé. “It’s too early in the conflict to predict what fuel might mean for the rest of the year.”

Last month, FedEx raised its profit and revenue forecasts for 2026.

UPS stock was down 5 percent on the report as of Tuesday morning.

Like FedEx, UPS has increased fuel surcharges in step with rising oil prices, as traffic through the Strait of Hormuz remains constrained.

UPS’ domestic ground fuel surcharge has increased from 21.25 percent on Feb. 23, the week before the Iran war started, to 27 percent effective Monday. For domestic air, those charges have jumped from 20.25 percent to 29.25 percent.

The Atlanta-based delivery giant reaffirmed its outlook, anticipating full-year revenue growth of 1.1 percent to approximately $89.7 billion and adjusted operating margin of approximately 9.6 percent. Diluted earnings per share are expected to be about flat to 2025.

In the first quarter, revenue at the logistics provider declined 1.6 percent to $21.2 billion, while net profit plummeted 27.2 percent to $864 billion. Operating margin also shrank from the year prior, down to 6 percent of revenue from the 2025 period’s 7.7 percent.

Tomé said UPS would return to revenue and profit growth in the second quarter and expand operating margin as it completes the 50 percent glide-down of its volumes for Amazon, its largest customer, by June. The CEO also highlighted shifting priority away from Chinese e-commerce sellers to higher-margin premium segments like SMBs, B2B and healthcare.

“Our actions are moving us toward a more profitable U.S. small package business, with the back half of 2026 expected to be the inflection point,” said Tomé.

But the lack of specific guidance for the second quarter and a margin miss at the company’s top revenue driver, its U.S. domestic unit, “is likely to be viewed unfavorably,” Evercore ISI analyst Jonathan Chappell wrote in a research note.

Revenue at the segment declined 2.3 percent to $14.1 billion amid the Amazon volume reduction, while adjusted operating profit fell 44 percent to $565 million.

The average domestic cost to ship a parcel increased 9.7 percent in the quarter to $13.40, outpacing revenue per piece, which grew by 6.5 percent.

Offsetting many of the headwinds, UPS saved roughly $600 million in the first quarter as part of its nationwide network adjustment. The courier is cutting another 30,000 jobs in 2026 as it continues to slash labor spending and prioritize a shift to automation across its warehouse network. The company said it closed 23 buildings during the recent quarter and plans to shutter an additional 27 facilities this year.

For the full year, UPS expects to achieve approximately $3 billion in year-over-year cost savings from this initiative.