IEEPA Tariffs Struck Down: What the Supreme Court’s Ruling Means for Importers, Refunds, and New Trade Uncertainty

The Supreme Court’s February 20 decision to nullify the Trump Administration’s International Economic Emergency Powers Act (IEEPA) tariffs left global business leaders wondering how to navigate this sudden turn of events. All those answers still aren’t available, but here is what we know and how we believe companies should best respond to a situation that remains fluid.

We will provide more detailed updates and analysis in the days to come. But companies should be aware of the following:

• The decision does not affect tariffs imposed based on other express trade/tariff authorities. Just hours after the Supreme Court’s decision, President Trump announced a new, additional 10 percent global tariff under Section 122 of the Trade Act of 1974. Such tariffs may only be enacted for 150 days—any extension beyond that time would require Congressional approval. But President Trump was adamant Friday that he would find a way to move forward with tariffs, and it seems unlikely he will willingly let this new tariff expire.
• Importers who paid IEEPA tariffs are 1) Likely entitled to a refund for IEEPA based tariffs already paid, and 2) No longer responsible for payment of any IEEPA based tariffs not yet paid or liquidated.
  • However, the Supreme Court did not make any direct rulings on whether refunds should be paid or how. The U.S. Court of International Trade (CIT) likely will need to sort that out in the weeks and months ahead.
• Importers interested in seeking a refund of IEEPA based tariffs will need to compile the relevant Customs and Border Protection (CBP) entries for the invalidated tariffs from their ACE Report, including duties at issue, the relevant entries, liquidation status, etc., to make supportable refund claims. Importers will also need to be prepared to provide complete CBP entry summary packages to support their claims. The process, once established, might take a while to refund money, but the process should be relatively straightforward.
• On the other hand, parties downstream on the supply chain may face much more uncertainty regarding refunds. Existing tariff regulations impose the duty of payment and the entitlement to refunds on importers of record.  Supply contracts, however, may have allocated the burden of these tariffs to parties in the supply chain other than importers of record, e.g. offshore manufacturers/suppliers or ultimate consignees of the imported product in the U.S.  Parsing the respective rights of parties to tariff refunds under supply chain agreements may lead to disputes and increased litigation throughout the supply chain.
• Businesses breathing a sigh of relief that the IEEPA tariffs are gone may not want to relax just yet. The Administration seems set on imposing other tariffs to replace those the Supreme Court struck down—and those new tariff regimes may be more complex than the ones they are replacing. Also, CBP and the Department of Justice may argue in the CIT proceedings for a more limited scope of entitled refunds
• The ruling against Trump's tariffs creates uncertainty for existing trade agreements with countries like China, Canada, and the UK. That could lead to efforts to renegotiate or challenges to these agreements by these countries and could disrupt ongoing trade negotiations.

Womble Bond Dickinson will keep you informed on future tariff developments and how you may wish to prepare your business for these upcoming changes.