SCOTUS Invalidates Trump Administration's IEEPA Tariffs and US Administration Response

In a shot now heard around the world, the U.S. Supreme Court issued its long awaited decision addressing whether the Administration’s tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were lawful.

Ruling on the consolidated cases of Learning Resources v. Trump (24-1287)[1] and Trump v. V.O.S. Selections (25-250)[2], the Court ruled 6-3 that the tariffs exceeded the Executive’s statutory authority and has therefore invalidated the challenged tariffs, without providing guidance on the process for potential refunds.

In response, President Trump announced the same day that he will enact new 10 percent global tariffs under Section 122 of the Trade Act.  He then used his Truth Social social media account two days later to announce an intention to raise tariffs further to 15% under Section 122 - the maximum limit under this authority, which has a limited duration of 150 days without Congressional approval. 

Importantly, the Court did not address processes for refunds of illegal tariffs, whether judicially via claims brought before the Court of International Trade (CIT), or administratively for importers through U.S. Customs’ Automated Customs Entry (ACE) portal, which keeps track of entries and duties paid already for goods subject to the IEEPA tariffs.  Since some tariffs will continue to be imposed and paid, some have suggested a more orderly approach might be to provide credits off future tariffs.  

In any event, the Court’s ruling represents a major decision on the U.S. Constitution’s principles of separation of powers among the Judicial, Legislative, and Executive branches as it relates to “major questions,” suggesting Congress remains firmly in control of the power of taxation and delegation of tariff authority.  At the same time, it leaves open to the Executive, Judicial, and Legislative branches resolution of the significant questions on the reimposition, refunds/credits, and impact on existing and future tariff trade deals. 

In the meantime, all national security tariffs under Section 232, and existing Section 301 tariffs remain in place. The Administration is also initiating several Section 301 investigations.  Treasury Secretary Scott Bessent indicated tariffs implemented under Section 122, combined with additional tariffs implemented under Section 232 and Section 301, "will result in virtually unchanged tariff revenue in 2026." Left in place will be a swath of tariffs on specific industries, including automobiles and auto parts, steel and aluminum, copper and softwood lumber. 

With over USD 129 billion in IEEPA-based tariffs collected through the end of 2025,[3] tthe ruling will have profound effects on the global trade economy, triggering substantial contractual, operational, and insurance related consequences. Affected parties now must contend with navigating a complex web of refund procedures and related contractual terms dealing with pricing, indemnity, and cost allocation provisions in transactions impacted by the now invalidated tariffs. 

In this client alert, we outline the key background, analyze the implications of the Supreme Court’s ruling and Administration response, and highlight immediate next steps for companies affected by the decision.

THE DECISION LIMITS THE USE OF IEEPA AS A PRIMARY TOOL OF FOREIGN POLICY

Tariff revenues rose sharply in 2025 as the U.S. Department of Homeland Security collected over $289 billion in custom duties and excise taxes during the calendar year 2025.[4]. The majority of that revenue was generated by tariffs originally imposed with the emergency authority claimed by the Administration under IEEPA. The Administration presented the measures as being responsive to national security concerns, including fentanyl trafficking and persistent trade imbalances.

IEEPA grants the President broad authority to regulate economic transactions during a declared national emergency. Although historically used to target discrete threats—such as terrorism financing, proliferation activities, and cyber related sanctions—IEEPA has increasingly been invoked in contexts touching core trade and commercial policy. As a result, IEEPA has become a critical inflection point for determining the outer boundaries of executive authority in the trade arena.

The tariff actions at issue applied to a wide range of imports, with top affected countries and rates including: Brazil (40% on select goods), Canada (35% on non-energy products; 10% on energy), China (10%),[5] India (18%),[6] and Mexico (25-30% for non-USMCA[7] goods). As of mid-December 2025, these IEEPA-based tariffs had generated approximately USD 129 billion in duties,[8] with current totals estimated to exceed USD 175 billion.[9].

The IEEPA-based tariff measures had wide ranging implications for importers, exporters, manufacturers, and charterers, often resulting in increased landed costs and extensive pass through provisions in commercial contracts. Given their breadth and impact, the tariffs levied under IEEPA were immediately challenged in consolidated litigation (Learning Resources v. Trump and Trump v. V.O.S. Selections). For an overview of the IEEPA framework and the context leading up to this litigation, please see Clyde & Co’s previous client alert: Turbulence Ahead: How Current and Future Trade Measures Affect Aviation and Related Industries.

SUMMARY OF THE SCOTUS RULING

The Supreme Court, in a 6-3 decision, held that IEEPA does not authorize the President to impose the reciprocal and fentanyl tariffs that form the vast majority of  tariffs imposed by the President to date.

The central question was whether IEEPA’s authorization to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit…importation or exportation” includes the authority to levy tariffs, which constitute taxes on imported goods. The Court held that it does not, because (1) the statute’s power to “regulate…importation” does not encompass the distinct Article I taxing power; (2) Congress has always used explicit terms such as “duty” or “tariff,” imposing specific limits, when delegating tariff authority; (3) extending “regulate” to include taxation would also render portions of IEEPA unconstitutional, since the statute likewise authorizes the President to “regulate…exportation,” and the Constitution forbids taxes on exports, which also are mentioned in the relevant provisions of IEEPA.

The dissents—one by Justice Thomas and another by Justice Kavanaugh, joined by Justice Alito—contend that IEEPA’s authority to “regulate…importation” has historically and textually included the ability to impose tariffs, that broad delegations in foreign affairs and trade matters fall well within constitutional limits, and that the majority unjustifiably narrows the President’s longstanding discretion to use tariffs as a policy tool.

What the Decision Means

Refund implications. The decision provides no guidance on refunds, meaning an automatic refund pathway for duties previously collected is highly unlikely. In practice, importers will likely need to file individual claims before the Court of International Trade (CIT) or pursue other established customs-law procedures, an approach that will introduce significant uncertainty, increase procedural complexity, and lead to case-by-case litigation.

Contractual consequences. Because the ruling invalidates the legal basis for the IEEPA-based tariffs without providing commercial or private law guidance, parties in supply chains, logistics arrangements, or charterparty contracts may face disputes over responsibility for tariff related costs, including price adjustments, reimbursement, or allocation clauses. 

Agency direction. The Court does not address expected next steps from Customs and Border Protection (CBP), U.S. Department of Treasury, and the United States Trade Representative (USTR), nor does it require any specific regulatory response. It remains unclear how, or how quickly, the trade agencies will adjust entry processing, liquidation, or refund procedures in light of the decision, leaving stakeholders to await post-decision guidance from the agencies.

WHAT’S NEXT?

Tariff Administration and Refund Procedures

With the Supreme Court’s ruling striking down the IEEPA-based tariffs, the immediate question for importers is how refund claims will be administered. Although the Court did not specify any remedy or procedural pathway, CBP is expected to issue guidance outlining the process importers must follow to recover duties paid under the invalidated measures. It is entirely possible, however, that CBP and the Administration will simply require parties to use existing federal procedures to secure refunds, such as filing an action in the CIT. 

In the absence of a new, case-specific mechanism, companies will likely need to rely on existing tariff regulations and related processes.  

Section 1581(i) Claims: The most likely legal avenue for seeking a refund is through a “Section 1581(i)” action filed with the Court of International Trade. 28 U.S.C. § 1581(i) provides that the CIT has exclusive jurisdiction over civil actions against the United States arising from laws governing import‑related revenue, tariffs, and the administration or enforcement of such measures, unless the matter falls within statutory exceptions for antidumping or countervailing duty determinations. The deadline to file such actions is “within two years after the cause of action first accrues.” (28 U.S.C. § 2636(i)) Many companies, including Costco,[10] Kawasaki,[11] Bumble Bee Foods,[12] Revlon,[13] and EssilorLuxottica,[14] have already filed protective actions to safeguard potential refund rights.

Despite these existing mechanisms, several material questions remain unsolved:

• Whether CBP will require importers to use existing procedures or establish a dedicated refund process tailored to the Supreme Court’s ruling;
• Who will be eligible to submit refund claims (e.g., importer of record, assignees, downstream purchasers); 
• Applicable deadlines, including whether special rules will apply for entries approaching liquidation; and
• How CBP will structure the review process (e.g., PSCs, protests, a new administrative protocol, or potential referral to the CIT.

Alternate Tariff Schemes and Continued Use of “Secondary Tariffs” as a Tool of Foreign Policy.

The Court’s majority and dissent concur that the President continues to have alternate tools available to order tariffs. As Justice Kavanaugh emphasized in dissent, these options include long-standing statutory tools such as Sections 122, 201, and 301 of the Trade Act of 1974. 

Section 232 of the Trade Expansion Act of 1962 (codified 19 U.S.C. § 1862), for example, authorizes the President to impose tariffs based on findings from the Department of Commerce that the imported goods “threaten to impair national security.” These findings may come after an investigation initiated by industry petitions or by the executive branch itself. For example, in 2018, the President ordered tariffs of 25% on steel and 10% on aluminum imports following a Section 232 investigation, which tariffs later were extended to derivative products made from those materials.

Similarly, under Section 301 of the Trade Act of 1974, the US Trade Representative is authorized to impose tariffs or other import restrictions after an investigation determining that the acts, policies, or practices of a foreign government are burdening or restricting US commerce, or if the rights of the United States under any trade agreement are being denied. Thus, effective October 14, 2025, the USTR imposed substantial port fees and proposed additional tariffs in retaliation for China’s practices in the maritime, logistics, and shipbuilding sectors. Those measures were suspended on November 10, 2025, for one year under an agreement between the United States and China. (For additional background on tariff authorities and their commercial impacts, see Clyde & Co’s prior client alert: USTR Section 301 Fee and Tariff Measures and Their Impact to Charterparties.

Broader Commercial and Industry Implications

While the immediate focus for many companies may be on potential refund procedures, the practical impact extends well beyond duty recovery. Parties will need to consider the impact of this decision on their commercial and contractual relationships. 

Parties also will need to take into account that additional tariffs or substitute trade measures may be imposed, even while refund actions are pending. These issues are likely to produce operational confusion, overlapping liabilities, and complex timing issues for companies attempting to manage cost recovery on past imports while simultaneously adapting to new tariff regimes.

From a commercial standpoint, tariffs and related trade measures often trigger pricing adjustments, renegotiation of cost allocation provisions, force majeure disputes, and increased reliance on pass through clauses. Tariff fluctuations also can lead to supply chain disruptions, port congestion, vessel delays, cargo deterioration, and additional storage or demurrage costs. These circumstances may lead to disputes between carriers, shippers, consignees, beneficial cargo owners, and others within the supply chain.

In the shipping and logistics industries, companies therefore may face pressure to revisit long term supply contracts, transportation agreements, charterparties, and procurement arrangements as counterparties seek to clarify who bears the financial and operational burden of any renewed tariff measures. Companies also may find themselves embroiled in disputes about how any tariff refunds will be handled, shared, or distributed along the contractual chain where such costs were shared or passed on. 

These disruptions may also translate into claims for insurance coverage of incurred losses. For example, Protection & Indemnity (P&I) Clubs—which insure shipowners and charterers for a wide range of marine liabilities—may see increased claims arising from delays, deterioration, or handling issues linked to tariff driven bottlenecks. Any future re imposition of duties under alternative authorities could heighten this exposure.

Similarly, in the aviation industry, all players will continue to face increased pressure to ensure clarity on burden-sharing of any tariff-related duties or price escalations. As always, documentation is of utmost importance, particularly around assigning liability for future potential tariff exposure, which often are asserted as equivalent to taxes. This may arise in price negotiations, escalation mechanics or around tax or tariff indemnity provisions. Uncertainty is likely to remain in the supply chain, and while commercial aviation was spared in most of the IEEPA tariff announcements, future tariffs due to Section 232 or other investigations are not out of question. The recent tariffs against Canada potentially effecting Bombardier exports are but one example. 

In short, the implications of the IEEPA ruling extend beyond recovery of past-paid tariffs. Meaningful contractual, operational, and insurance related risks remain. It may be prudent for companies in affected sectors to track these developments and consider whether updates to existing contracts or risk management approaches are warranted.

As previously mentioned, on the day of the decision, the President announced he would impose a 10 percent “global” tariff pursuant to Section 122 of the Trade Act of 1974, which he later said on social media would be increased to 15%. Those tariffs, absent congressional approval, may only remain in place for 150 days – but signal that this is not the end of tariff-related developments.

RECOMMENDED ACTIONS FOR CLIENTS

As agencies prepare to clarify the refund process and the broader trade landscape continues to evolve, a few focused steps can help companies position themselves effectively.

Companies may wish to begin organizing key customs and contractual records—such as entry summaries, broker communications, product classifications, and tariff allocation provisions—to support potential refund submissions and any related commercial discussions. Coordination with trade counsel can also help assess preservation strategies and timing considerations as refund procedures take shape.

Building on these initial steps, additional near‑term actions include:

• Review relevant contracts for tariff related pricing, pass through, or indemnity provisions that may guide how any refunds are allocated or claimed.
• Identify all potentially affected entries and shipments where IEEPA-based duties were paid.
• Monitor forthcoming CBP guidance and any related agency or legislative action that may affect refund timelines or eligibility.
• Conduct internal scenario planning to prepare for possible shifts in tariff authorities or the introduction of revised tariff measures.
• Consider whether legal action, including CIT filings, may be advisable to preserve refund rights while awaiting further clarity from CBP and other federal actors.

This measured preparation can help companies remain agile as the regulatory environment develops, without committing to specific procedural steps before formal guidance is issued.

CONTACT US

For tailored advice on how the Supreme Court’s ruling may affect your commercial arrangements, tariff recovery strategies, insurance exposures, or ongoing trade compliance efforts, please contact our team.