Supreme Court strikes down IEEPA tariffs, prompting widespread refunds and legal disputes

On February 20, 2026, the U.S. Supreme Court delivered a pivotal ruling in Learning Resources, Inc. v. Trump, holding that the International Emergency Economic Powers Act (IEEPA) does not authorise the President to impose tariffs. The 6–3 decision clarified that while IEEPA permits the President to “regulate… importation” during a declared national emergency, it does not extend to imposing tariffs, considered a form of taxation constitutionally reserved exclusively for Congres...

s. The majority opinion emphasised the longstanding legislative purpose of IEEPA, which had traditionally been utilised for sanctions and asset blocking, not for broad-based trade duties. As such, the Court invalidated sweeping tariffs implemented under IEEPA, including so-called “fentanyl tariffs” on imports from Canada, Mexico, and China, “reciprocal tariffs” applied at differing rates on all countries, plus additional tariffs on products originating from Brazil and India.

In the immediate aftermath, the administration terminated these IEEPA-based tariffs effective February 24, 2026. However, the ruling does not impact other tariffs imposed under separate statutory authority, most notably those enacted under Section 232 of the Trade Expansion Act of 1962, such as tariffs on steel, aluminium, autos, and various wood products, which remain in force.

Following the Supreme Court’s decision, on March 4, Judge Timothy M. Eaton of the U.S. Court of International Trade directed U.S. Customs and Border Protection (CBP) to initiate a process to refund importers all IEEPA tariffs paid, plus applicable interest. CBP is currently developing a refund mechanism through its Automated Commercial Environment (ACE) platform, anticipated to activate in the coming weeks. This development has generated considerable uncertainty among importers and downstream customers regarding their respective rights and obligations to these refunds.

Under U.S. customs law, there is no automatic requirement for importers to pass on tariff refunds to suppliers, retailers, or consumers. Consequently, whether importers must distribute these refunds downstream depends largely on the contractual arrangements, such as purchase orders, invoices, and supply agreements, between parties. Legal experts advise all participants in the supply chain affected by the Supreme Court’s ruling to thoroughly review their contracts and related documents concerning the treatment of IEEPA duties to minimise potential disputes or litigation risks.

Indeed, multiple lawsuits have quickly emerged alleging breach of contract, deceptive trade practices, and unjust enrichment tied to IEEPA tariff refunds. Even absent formal litigation, pressure is expected from retailers, consumers, logistics firms, and political figures urging importers to share these benefits with downstream parties, potentially prompting negotiations prior to the completion of refund distributions.

The Supreme Court’s decision also raises significant accounting implications for companies subject to these tariffs. Financial reporting standards require affected entities to evaluate the impact of the ruling on their financial statements, including necessary disclosures about potential refunds and related contingent liabilities. Firms must consider the subsequent-events guidance to appropriately reflect the likelihood and magnitude of tariff repayments in their reports.

While the ruling invalidates IEEPA-based tariffs and mandates their refund, it simultaneously highlights ongoing complexity in U.S. trade policy. Tariff risk has not disappeared but may shift to other legal mechanisms and statutes as the government continues to balance trade enforcement with congressional authority constraints.

In sum, the Supreme Court has reaffirmed constitutional limits on executive power over taxation and trade tariffs, emphasizing that any broad imposition of import duties requires explicit congressional legislation. As the refund process unfolds, the commercial and legal ramifications for companies engaged in cross-border trade will continue to evolve, necessitating careful contract management, regulatory compliance, and strategic engagement with all stakeholders in the import-export ecosystem.

Source: Noah Wire Services