UPS files for $500mn tariff refund, vows to pass it to customers

UPS has been at the centre of the US tariff storm, processing 16 million International Emergency Economic Powers Act or IEEPA-related entries and remitting over $5 billion to the US Treasury since the tariffs were initiated. UPS Chief Executive Officer Carol Tomé was unequivocal about the company's role: "We are just a pass-through. We collect, and we remit to the government."

Now that the tariffs have been deemed refundable, UPS began filing applications with the US Customs and Border Protection on April 20. The filings cover approximately 2.5 million entries worth just under $500 million; processed on a last-in, first-out basis. Tomé said the company's preference is cooperation over confrontation: "Our approach is to work with the US government and not to sue the US government." She added that once the Treasury remits the funds, UPS will pass them straight back to its customers.

Tome was responding to questions from analysts during the earnings call following the company’s announcement of its first-quarter 2026 financial results.

West Asia crisis: Limited exposure, rising costs
UPS's exposure in the Middle East is relatively contained, with first-quarter export and import revenue from the region totalling around $130 million. Safety of its approximately 2,000 employees in the region was the immediate priority. "Job number one was to keep our people safe. We have about 2,000 people there, and they're safe," Tomé said. However, the inability to fly over certain airspace is pushing up costs as UPS works to maintain continuity of service for its customers.

On a related front, Tomé flagged another emerging regulatory shift: the elimination of de minimis provisions in Europe, due to take effect this summer. "We don't know if it'll be disruptive or not, but it's a change," she said, drawing a comparison to the disruption witnessed in the United States last year when similar provisions were withdrawn. Despite these pressures, Tomé expressed satisfaction with her international team's performance on revenue quality and growth.

Amazon Glide Down: A managed transition
Amazon's share of UPS's total revenue has fallen to 8.8% at the end of Q1 2026, down from north of 13% not long ago. Tomé described the reduction as a deliberate and well-managed process, praising the collaboration with the e-commerce giant. "Really pleased with how we've partnered with Amazon on this glide down. We hold that company in very high regard," she said.

The ongoing relationship is being anchored increasingly around returns logistics. This is an area where UPS sees significant structural opportunity. Tomé noted that 19% of all e-commerce sales are returned, and UPS's reverse network, including its boxless and labelless returns capabilities, positions it well. She added that the returns relationship with Amazon is expected to continue growing.

China-US trade lane: Volatility easing
The China-US trade lane, described by Tomé as UPS's most profitable, took a hit in Q1, with margins in the Asia-Pacific region declining 500 basis points year-on-year. However, she characterised this as temporary.

With the elimination of the IEEPA tariff and a reversion to a 10% tariff rate, Tomé said conditions are improving: "We're actually seeing trade lanes move from red to orange to yellow, and in some cases green. Things are starting to normalise." She expects margins to recover as trade flows stabilise. In Europe, UPS is pivoting away from low-margin e-commerce toward premium market segments to drive further margin improvement, with a medium-term target of returning international margins to the mid-to-high teens.

SMB, B2B, and healthcare: The growth engine
Tomé struck her most optimistic note when discussing UPS's strategic focus on small and medium-sized businesses (SMB), business-to-business (B2B) segments, and healthcare. She framed 2026 as a pivotal year: "This is the year of inflection, so the back half of the year will look considerably different than the first half."

In its international operations, UPS grew SMB penetration to 62% and B2B penetration to approximately 71%. Operationally, hub productivity is at its best in 20 years, and 67.5% of UPS buildings are now automated, delivering a cost per piece 28% lower than non-automated facilities.

Healthcare emerged as a particularly significant long-term driver. Tomé said it features across every segment of UPS's business with double-digit operating margins, and highlighted the growing trend of pharmaceutical companies shipping GLP-1 drugs directly to consumers, bypassing traditional distribution channels, as an emerging opportunity the company intends to capture aggressively. She summed up with quiet confidence: "We're winning in the right markets.”

Q1 2026 performance
In Q1 2026, UPS showed resilience amid a challenging economic climate. Consolidated revenue reached $21.2 billion, underscoring strong performance despite macroeconomic pressures. Operating profit was $1.3 billion, with a 6.2% margin impacted by $350 million in short-term transitional costs. While the U.S. Domestic segment saw volume declines, revenue per piece growth helped offset the drop.

“Our efforts to streamline operations and focus on high‑margin segments like healthcare logistics are showing results. We are committed to enhancing our service offerings and improving operational efficiency,” Tome said, commenting on the first‑quarter performance and underscoring the company’s strategic focus.

UPS fast facts
UPS, one of the world's largest package delivery companies, was founded in Seattle in 1907 and is today headquartered in Atlanta, Georgia. The company posted revenues of $88.7 billion in 2025 and employs approximately 460,000 people globally. Its small package operations, the core of its business, generated $78.1 billion in revenue, handling an average of 20.8 million packages and documents daily across more than 200 countries and territories. The company serves approximately 1.6 million shipping customers and 10.7 million delivery recipients, supported by a fleet of around 125,000 vehicles –including over 19,000 alternative fuel and advanced technology vehicles – and a combined air fleet of 490 aircraft (without retired MD-11s). Its Supply Chain Solutions division, which includes a fast-growing healthcare logistics arm spanning 21.6 million square feet of compliant distribution space across 35 countries, contributed $10.5 billion in revenue for 2025.