Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

The Supreme Court Ends IEEPA Tariffs, Bringing Fresh Uncertainty for Companies

Skadden Publication / Tariff Watch

Brooks E. Allen Julie Bédard Shay Dvoretzky Margaret E. Krawiec Jennifer Permesly Parker Rider-Longmaid Michael A. McIntosh

Executive Summary

  • What’s new: On February 20, 2026, the U.S. Supreme Court struck down sweeping tariffs imposed by President Trump under IEEPA, holding that the president lacked authority to impose tariffs under that statute.
  • Why it matters: The decision creates significant uncertainty for businesses on a host of new issues — including how the tariff refund process will work, potential litigation over these refunds and which new tariffs may be unveiled in the coming months. 
  • What to do next: Companies may want to move quickly to review the status of customs entries that may be eligible for refunds, take steps to preserve their rights, review commercial contracts and assess potential litigation exposure.

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On February 20, 2026, the U.S. Supreme Court struck down sweeping tariffs imposed by President Donald Trump, holding that he lacked the authority he claimed under the International Emergency Economic Powers Act (IEEPA).

In a 6-3 opinion written by Chief Justice John Roberts, the Court held that IEEPA does not authorize the president to impose tariffs. Chief Justice Roberts, joined by Justices Neil Gorsuch and Amy Coney Barrett, relied on the major questions doctrine, explaining that a power of such vast economic or political significance required clear congressional authorization.

IEEPA doesn’t meet that high bar, the Court concluded, because the power to “regulate” doesn’t include the power to tax. Justice Elena Kagan, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, didn’t reach the major questions issue because they concluded that the president simply lacked the authority to impose tariffs under IEEPA’s plain text. Justices Clarence Thomas, Samuel Alito and Brett Kavanaugh dissented.

IEEPA authorizes the U.S. president to “regulate … importation or exportation” in order “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.”

The opinions in these two consolidated cases — Trump v. V.O.S. Selections, Inc. and Learning Resources, Inc. v. Trump — do not answer a key question for businesses that have already paid tariffs: whether and how refunds will be available. The majority opinion says nothing on that question, and in remarks to the press shortly after the decision’s release, President Trump suggested that litigation likely would ensue.

Nevertheless, there are strong reasons to believe that refunds should ultimately be available:

  • Unliquidated entries. Importers should be able to file a post-summary correction (PSC) with respect to “unliquidated” customs entries — i.e., entries for which they have paid the initial estimated tariff bill, but for which U.S. Customs and Border Protection (CBP) has not yet issued the final “liquidation” order establishing the definitive amount of tariff liability. The PSC would “correct” the entry to remove the IEEPA tariff.
  • Liquidated entries. For entries that have already been subject to a liquidation order, importers should be able to either pursue an administrative protest with CBP or (more likely) file a claim with the Court of International Trade (CIT). On December 15, 2025, the CIT held in AGS Co. Auto. Sols. v. U.S. Customs and Border Prot. that it has authority to “reliquidate” entries — i.e., order refunds of IEEPA tariffs even after the entry has liquidated. Critically, the U.S. government conceded — both in that proceeding and in several other IEEPA cases — that it would not oppose the court’s reliquidation authority and would refund any IEEPA duties found to have been unlawfully collected following a final and unappealable decision. The CIT is expected to establish a case management process to handle refund claims, likely through its residual jurisdiction under 28 U.S.C. § 1581(i) — the same jurisdictional basis on which the plaintiffs brought the challenge that culminated in the February 20, 2026, ruling. That process would cover the nearly 2,000 cases that have already been filed for that purpose, as well as any additional cases that may follow.

It is still conceivable that CBP and the Trump administration could bypass the “default” procedures set out above and fashion a bespoke mechanism for processing tariff refund claims. Depending on how this mechanism is constructed, it could enhance certainty and efficiency in processing and resolving claims. But there has been no indication so far that the administration has plans to unveil such a mechanism.

Regardless of the process ultimately pursued to receive refunds, negotiation and litigation is expected over who is entitled to the proceeds: the “importer of record” or downstream parties to whom the cost of the tariff was passed. Debates over this issue — along with the issue of whether the importer is obliged to seek refunds in the first place — are expected to play out repeatedly in the coming months.

As a general matter, the applicable regulations (19 C.F.R. § 24.36) provide that refunds are paid to the importer of record. Notably, in January 2026, the CIT revised its filing forms, presumably in anticipation of a wave of claims in which the ultimate economic benefit of the remedy would flow to a party other than the plaintiff, to require plaintiffs to identify any third-party financing supporting their claim.

Another key question is how the Trump administration will respond to losing IEEPA tariff authority, which has been a central pillar of the president’s international trade agenda. Justice Kavanaugh’s dissenting opinion identifies five potential sources of authority (discussed below) that the president could rely on to impose tariffs now that IEEPA is off the table.

Indeed, President Trump has already announced his intention to impose new tariffs under two of those statutes, though they place substantive and procedural limits on the president’s tariff authority and may also raise additional legal questions about the scope of presidential power.

The Supreme Court’s Majority Opinion

Although this case generated over 150 pages of opinions, Chief Justice Roberts’ majority opinion (joined in full by Justices Gorsuch and Barrett, and in part by Justices Sotomayor, Kagan and Jackson) is only 20 pages long, and its bottom line holding is unambiguous: IEEPA does not authorize the president to impose tariffs of any kind.

The majority eschewed narrower holdings in favor of a broad declaration that IEEPA doesn’t confer tariff power. (It could have, for instance, held that the specific tariffs at issue exceeded the statute’s bounds while leaving open the possibility that other, more limited tariffs might be permissible under IEEPA. The courts below have taken this approach.)

The majority reached its conclusion through a traditional statutory analysis. The majority began by recognizing the background principle that the Constitution confers the taxing power on Congress. The president has no inherent authority to impose tariffs, so the only question is whether Congress conferred tariff authority on the president.

On that question, Chief Justice Roberts and Justices Gorsuch and Barrett would have applied the major questions doctrine — the principle that the Court will not “read into ambiguous statutory text extraordinary delegations of Congress’s powers.” The doctrine applied with “particular force” to IEEPA because:

  • The claimed delegation involved a core congressional power (taxation).
  • No president had ever invoked IEEPA to impose tariffs before.
  • The tariffs had sweeping economic and political significance.

Accordingly, Chief Justice Roberts, joined by Justices Gorsuch and Barrett, required the president to point to “clear congressional authorization” for his claimed powers. Justices Kagan, Sotomayor and Jackson would not have applied the major questions doctrine.

All six justices in the majority found that the power to “regulate … importation” did not authorize tariffs. As a textual matter, to “regulate” is different than to “tax.” And in the context of IEEPA, reading “regulate” to mean “tax” would pose constitutional problems, the Court found, because IEEPA authorizes regulation of exportation, and the Constitution forbids taxing exports. The Court then turned to context, looking at the words that surround “regulate” and concluding that because those words (“nullify,” “void,” “prevent”) don’t involve revenue raising, “regulate” doesn’t either.

Justice Kavanaugh (joined by Justices Thomas and Alito) wrote the principal dissent. He contends that presidents have historically imposed a range of tariffs for a range of reasons. The dissent also relies on the notion that IEEPA’s broad powers — including the power to impose quotas and embargoes — includes the lesser power to impose tariffs.

As to major questions, the dissent contends the doctrine is satisfied because, in its view, IEEPA clearly authorizes the imposition of tariffs, and because the major questions doctrine either doesn’t apply or applies with lesser force in the foreign affairs context. The dissent concludes by enumerating other statutory bases of authority that the president might rely on to impose tariffs (discussed more fully below) and warns that the United States “may be required to refund billions of dollars” that have been unlawfully collected — which will “likely be a mess.”

What’s Next?

Issuing Refunds

The majority opinion doesn’t mention refunds. Indeed, beyond affirming the Federal Circuit, the majority doesn’t even hint at the downstream consequences of its decision. As discussed above, there are strong reasons to believe that refunds of IEEPA tariff payments should be available, notwithstanding the majority’s silence on the point.

The procedural path to obtaining refunds depends on whether an importer’s entries have already been liquidated by CBP.

For entries that have not yet liquidated. Importers should consider filing PSCs with CBP to remove the IEEPA duties. Liquidation is the CBP’s final, official determination of the duties owed on an import, marking the point at which the entry is legally closed. Until that moment, the estimated duties paid at the time of entry act as a placeholder, and liquidation either confirms that amount or triggers a refund or billing notice for the difference.

For entries that have already liquidated. Options include filing a formal protest with CBP or filing a case directly with the CIT. There are strong arguments for bypassing the protest process and going directly to the CIT — particularly where CBP was simply executing a presidential directive now declared unlawful, thereby making the administrative protest process arguably futile. We expect the CIT to provide further guidance as cases move through the system in the coming weeks and months. Importers should consider taking steps now to preserve their rights, especially those with entries approaching liquidation deadlines.

The Supreme Court ruling also leaves several related issues unresolved. For instance, the administration’s elimination of the de minimis exemption from duties for goods valued at less than $800 was implemented through executive orders citing IEEPA as their legal basis.

The legality of the de minimis rescission is already the subject of pending litigation at the CIT, in Axle of Dearborn, Inc. d/b/a Detroit Axle v. Dep’t of Commerce. In this case, Detroit Axle argues that the president lacks authority to override the de minimis exemption, which is ultimately grounded in statute (19 U.S.C. § 1321). The case was stayed pending the outcome of the V.O.S. proceedings.

The administration has already signaled that it intends to continue relying on IEEPA to sustain the de minimis rescission despite the Supreme Court’s ruling. On the same day that the Court issued its opinion, President Trump signed a new executive order, “Continuing the Suspension of Duty-Free De Minimis Treatment for All Countries,” which expressly invokes IEEPA and directs CBP to continue collecting duties on shipments that would otherwise qualify for the statutory exemption.

Litigation Risk and Implications for Commercial Contracts

If and when refunds become available, companies eligible for refunds could face litigation from impacted counterparties and/or customers should they choose not to apply for a refund. Alternatively, if they successfully receive a refund, companies could face litigation from other businesses and consumers seeking a share of the refunds.

It is critical that concerned companies review their commercial contracts and thoroughly consider any attendant litigation risks.

Companies that believe they may be entitled to refunds for payment of invalidated IEEPA tariffs should first review their commercial contracts, which may have provisions that directly or indirectly address the allocation of responsibility for tariffs as well as the refund process.

As noted above, U.S. regulations provide for refunds to be paid to the importer of record. While some contracts may require the importer of record to bear the cost of tariffs, others may contain provisions expressly shifting the cost of tariffs to a party other than the importer of record. In such situations, contractual counterparties may wish to negotiate a process for ensuring that the importer of record, which is the entity with proper standing to pursue the refunds, actually pursues them and passes the refunds on to the affected party.

Contracts may also contain provisions that:

  • require sellers to mitigate the cost of applicable tariffs before passing on those costs to the buyer,
  • provide for credits or rebates to the buyer for downward adjustments in tariff rates, or
  • contain cost-shifting provisions depending on the tariff structure in place at the time of sale or services.

In such instances, the buyer may have a plausible claim for breach of contract where the seller fails to seek refunds or subsequently fails to pass on such refunds to the buyer. More likely, however, contracts will allocate responsibility for tariffs without clarifying which party is entitled to the benefit of any refunds or reductions.

For these reasons, it is critical for concerned companies to assess whether their contracts allocate the right to refunds or obligate either party to seek refunds. Where contracts are unclear or shift the cost of tariffs to a party other than the importer of record, concerned companies may want to proactively discuss responsibility for seeking refunds and the ultimate allocation of those refunds with their counterparties, before a dispute arises.

Companies may also want to consider related issues, including whether parties:

  • Should be required to provide notice to their counterparties prior to initiating suit for a refund.
  • Are entitled to assign their rights to any refunds to third parties.

Litigation Risk From Third-Party Businesses and Consumers

As mentioned above, an importer of record could face litigation risk from third parties if it fails to seek a refund to which it is entitled. California precedent, including the 1974 case Javor v. State Bd. of Equalization, suggests that companies may have an obligation to pursue refunds for invalidated tariffs when those tariffs raised prices for other businesses or consumers.

At the same time, businesses that successfully pursue refunds could face subsequent litigation. Indeed, companies not in direct contractual relationship with the importer of record may have borne some of the cost of the tariffs imposed on the importer of record. One could argue that an importer of record that passed the costs associated with the IEEPA tariffs on to other companies is unjustly enriched by a tariff refund, which would place the importer of record into a better position than it was in before the tariffs went into effect.

In that situation, a company could seek to bring quasi-contractual claims against the importer of record to recoup the additional expense of the IEEPA tariff.

Consumers may also seek to bring claims against importers of record for their tariff refunds to cover any added expenses they absorbed from the tariffs. Some courts have permitted plaintiffs to bring claims in similar situations. Consumers, like companies in business with importers of record, can seek to bring contractual or quasi-contractual claims against the importers of record.

In addition to these claims, state law provides consumers with causes of action for unfair competition and trade practices, which broadly prohibit unlawful, unfair or deceptive business practices. To be sure, importers of record could invoke a number of colorable defenses against such claims, including the voluntary payment doctrine.

The Fate of Bilateral Trade Agreements

Separately, as Justice Kavanaugh’s dissent flags, the Supreme Court’s decision creates significant uncertainty for the bilateral trade agreements that the administration negotiated pursuant to IEEPA. As a general matter, when the president adjusts the rate of duty applicable to imported goods (whether classified by type of merchandise or by country of origin), she or he must be acting pursuant to a specific statutory grant of authority. This principle was reinforced by the Court’s ruling.

Here, the core U.S. import duties set out in the trade agreements entered into over the past year rest on IEEPA authority, as implemented through executive orders. But through another February 20, 2026, executive order, “Ending Certain Tariff Actions,” the president directed that “the additional ad valorem duties imposed pursuant to IEEPA” through enumerated executive orders, as amended (the executive orders implementing the trade agreements had amended those orders), “shall no longer be in effect and, as soon as practicable, shall no longer be collected.”

In a few instances, tariffs established under these agreements — for example, the special 25% rate for U.K. steel and aluminum — rest on distinct authorities, such as Section 232 of the Trade Expansion Act of 1962, and are unaffected by these changes.

If President Trump wishes to preserve or recreate the IEEPA tariffs set out in the trade agreements his administration has negotiated with foreign trading partners over the past year, he will need to reimpose tariffs under one or more of the alternative statutory authorities described below. Each option carries its own substantive and procedural requirements.

Future Tariffs

President Trump has already announced his intent to replace the now-invalid IEEPA tariffs with a set of tariffs he claims are authorized by other statutes. As mentioned above, in his dissent, Justice Kavanaugh points to five potential authorities that the president might invoke to impose tariffs. Those provisions often contain limits, either procedural or substantive, and some are untested:

  • Section 232 of the Trade Expansion Act of 1962 authorizes the president to impose tariffs on a good, sector or class of goods upon a finding of a threat to national security after an investigation by the Department of Commerce. Section 232 imposes no limits on either the length that the tariff can be in effect or on the rate of tariff imposed. The key limitations to Section 232 tariffs are procedural: The provision authorizes tariffs only after a report is prepared by Commerce (after notifying and consulting with the Department of War1), and only after the report finds that importation of the goods in question, in such quantities or under such circumstances, threaten or impair national security. In his second term, President Trump has relied heavily on Section 232 tariffs, with respect to goods like steel, aluminum, buses, cars, copper, furniture, lumber, timber and trucks. And on February 20, 2026, President Trump announced his intent to invoke Section 232 again by means of an executive order, although he did not identify the particular goods or industries that would be targeted.
  • Section 122 of the 1974 Trade Act allows the president to address “large and serious” balance-of-payments deficits by imposing import surcharges of up to 15%, import quotas or a combination of both. Section 122 doesn’t require the president to conduct any predicate investigation, but tariffs imposed under this provision expire after 150 days unless Congress votes to extend them. As discussed above, President Trump has moved quickly to impose a near-universal 10% tariff under Section 122 and subsequently expressed his intent to raise the rate to 15%. Although Section 122 tariffs are time-limited, we cannot entirely rule out the possibility that, if Congress fails to act, the president would attempt to reimpose Section 122 tariffs after they expire.
  • Section 201 of the 1974 Trade Act authorizes “safeguard” tariffs in response to import surges that cause or threaten material injury to the domestic industry. These tariffs can only be imposed after an investigation by the International Trade Commission and are intended to allow a U.S. industry to adjust to import competition. Section 201 tariffs are limited to four years and may be extended to up to eight years. Section 201 has been invoked many times before — including in 2018, when the first Trump administration imposed tariffs on certain components used in solar panels.
  • Section 301 of the 1974 Trade Act authorizes the U.S. Trade Representative (USTR) to impose duties in response to foreign trade practices that are “unreasonable,” discriminate against U.S. persons or violate U.S. persons’ rights under trade agreements, following an investigation by USTR. Tariffs imposed under Section 301 can last up to four years but can be extended with no limit on the number of extensions. Given Section 301’s broad statutory mandate, its flexibility and its country-specific focus, many commentators have speculated that President Trump will rely on this authority to reimpose tariffs that underpin the bilateral trade agreements reached with other countries over the past year.
  • Section 338 of the 1930 Tariff Act (also known as the Smoot-Hawley Tariff Act) authorizes the president to impose tariffs on imports from any country that “discriminates” against U.S. commerce. Like Section 122, this provision has never been invoked, so its bounds are untested. This provision remains controversial, and some scholars view it as having been legally superseded by other provisions. Section 338 directs the International Trade Commission to “ascertain and at all times to be informed” about whether discrimination is occurring, and to “bring the matter to the attention of the President, together with recommendations,” but it is unclear whether this is a procedural prerequisite to the imposition of tariffs. The statute authorizes tariffs at rates up to 50%, with no limit on duration.

Additional Considerations

Given the continuing uncertainty for companies subject to U.S. tariffs, particularly in light of the Trump administration’s February 21, 2026, announcement that it would replace the invalid IEEPA tariffs with global tariffs of 15% under Section 122 of the 1974 Trade Act, concerned companies may want to continue to bear in mind other contract provisions that may permit parties to argue for an adjustment or mitigation of the tariff burden. These include force majeure and change in law provisions (discussed in a previous Skadden publication), among others.

Associates William Chandler, Chelsea Cooper, Steven Marcus and Paul Maxwell (Max) Novak contributed to this article.

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1 Congress has not yet acted on the administration’s renaming of the Department of Defense.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

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