- within Cannabis & Hemp and Insolvency/Bankruptcy/Re-Structuring topic(s)
In a much-anticipated decision, on February 20, 2026, the Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") are unconstitutional, holding that the statutory language of IEEPA does not permit the president to impose tariffs. This outcome was widely expected after lower courts ruled against the IEEPA tariffs, and several Justices expressed skepticism of the government's position during oral arguments last November. Nevertheless, the Supreme Court's opinion comes sooner than many in the trade community had anticipated.
The ruling has immediate implications for importers that paid IEEPA tariffs, who are now eligible to file suit seeking refunds. Unfortunately, the majority opinion provided no guidance as to how importers may be able to obtain their refunds. However, this likely implies that filing suit in the Court of International Trade ("CIT") under 28 U.S.C. § 1581(i) remains the proper course.
We note, nevertheless, President Trump's authority to unilaterally impose tariffs under alternative statutory authorities remains broad.
1. Legal Basis for the Decision
The Supreme Court held that IEEPA does not authorize the President to impose tariffs, rejecting the government's argument that the language from the statute "regulate . . . importation" implicitly provides the power to levy duties of unlimited scope, rate, and duration. Recognizing tariffs are a core congressional power of the purse, the Supreme Court ruled that Congress could only delegate its tariff powers if it does so in explicit terms and with strict limits. Under the "major questions" doctrine, clear authorization for economically and politically significant assertions of power are required and the Supreme Court did not find any clear congressional authorization to justify the power to impose these tariffs. The Supreme Court concluded that IEEPA contains no reference to "tariffs" or "duties" and that "regulate" is not ordinarily understood to confer taxing authority and the lack of historical precedent for using IEEPA to impose tariffs telling.
Procedurally, the Supreme Court agreed that the CIT had exclusive jurisdiction over the tariff challenges and therefore affirmed the Federal Circuit's decision in V.O.S. Selections, while vacating the D.C. district court's judgment in Learning Resources and remanding with instructions to dismiss for lack of jurisdiction.
2. Refund Process for Importers
The Supreme Court's opinion invalidated two separate sets of tariffs issued under the statutory authority of IEEPA: tariffs imposed on China, Canada, and Mexico purportedly for stopping the flow of fentanyl into the United States1, and worldwide reciprocal tariffs intended to reduce the United States' trade deficit.2
Importers that paid duties under these tariffs may soon be eligible to obtain refunds. Notably, the Supreme Court's opinion did not order U.S. Customs and Border Protection ("CBP") to automatically issue refunds, as some importers had hoped. The opinion also did not specify the proper mechanism for importers to obtain tariff refunds.
For unliquidated entries of merchandise subject to IEEPA duties (where a final computation of customs duties has not yet occurred), customs brokers may soon be able to request a refund through CBP's Automated Commercial Environment ("ACE"). As of today, entries imported on or after March 2025 are likely to be unliquidated as liquidation typically occurs 314 days after entry.
Where entries of merchandise have liquidated (likely the case for merchandise imported prior to March 2025), the process for obtaining a refund will be more complex. Based on the Court of International Trade's past statements, recovery is unlikely to occur through standard administrative procedures (i.e. an administrative protest and appeal with CBP).3 Instead, importers will likely be required to seek a specific judgement before the Court of International Trade, as discussed in our recent blog post.
Importers should begin evaluating entries subject to IEEPA duties, and file suit if any such entries have liquidated.
3. Tariff Risk Remains
Although this decision curtails the use of IEEPA, importers should not assume tariff risk has subsided. President Trump retains other statutory tools for imposing tariffs through executive action.
As discussed in our prior blog post, the administration may immediately impose tariffs under Section 122, albeit only on a temporary basis or under Section 338.
In the medium run, we will likely see expanded Section 232 tariffs based on national security findings, making an increase in Section 232 investigations likely. In addition, Section 301 provides another durable tariff mechanism. The administration has recently pursued Section 301 actions involving imports from Nicaragua and Brazil, signaling continued willingness to impose tariffs based on findings of unfair trade practices.
4. Conclusion
The Supreme Court's decision to strike down IEEPA tariffs marks a momentary but significant shift in the tariff landscape. While importers now have a pathway to seek refunds for duties paid under the invalidated tariffs, the process—particularly for liquidated entries—may prove complex. Importers should assess their potential claims and consider filing lawsuits at the CIT. At the same time, this ruling does not eliminate the broader risk of new or substitute tariffs, as the administration retains substantial authority under other statutory provisions.
Footnotes
1. Exec. Order No. 14194, Imposing Duties to Address the Situation at Our Southern Border (Feb. 1, 2025); Exec. Order No. 14193, Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border (Feb. 1, 2025); Exec. Order No. 14195, Imposing Duties to Address the Synthetic Opioid Supply Chain in the People's Republic of China (Feb. 1, 2025).
2. Exec. Order No. 14257, Regulating Imports With a Reciprocal Tariff To Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits (Apr. 2, 2025).
3. The Court of International Trade has stated the assessment of IEEPA tariffs would be non-protestable, as CBP is not exercising its discretion in collecting the tariffs. See AGS Company Automotive Solutions et. al v. U.S. Customs and Border Protection, et al., No. 25-00255 (Slip Op. 25-154), at 7 ("In such a case, a § 1581(a) protest would be futile because 'all that Customs is authorized to do is collect the' duty") (citing Thomson Consumer Elecs., Inc. v. United States, 247 F.3d 1210, 1215 (Fed. Cir. 2001)). Additionally, this Court has stated "[b]ecause Customs has no authority to make any decision regarding the legality or constitutionality of the Executive Orders at issue, this court has jurisdiction pursuant to 28 U.S.C. § 1581(i) rather than § 1581(a)..."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
