U.S. Supreme Court invalidates IEEPA tariffs, reshaping the Administration’s trade toolkit

Supreme Court holds that IEEPA does not permit tariffs

The Supreme Court decisively concluded that IEEPA does not authorize the President to impose tariffs. Chief Justice Roberts authored the majority opinion, joined in relevant parts by Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson. Justices Thomas, Alito, and Kavanaugh dissented. Additionally, Justices Gorsuch, Kagan, Barrett, and Jackson authored concurring opinions providing their views on statutory interpretation and the “major questions doctrine”.

Majority decision

The Supreme Court held that the power to impose tariffs is an exercise of Congress’s taxing authority, and that Congress did not grant the President authority to impose tariffs under IEEPA. Chief Justice Roberts, joined by Justices Gorsuch and Barrett, relied in part on the major questions doctrine. These three Justices concluded that the President’s use of IEEPA to impose sweeping tariffs represented a “transformative expansion” of executive authority with extraordinary economic and political consequences.

The Chief Justice’s opinion underscored the magnitude of the asserted Presidential authority, citing the Administration’s own projections that the tariffs could reduce the national deficit by trillions of dollars and underpin international agreements worth many trillions more. Against that backdrop, the Chief Justice’s opinion held that, contrary to the Administration’s assertion, vague statutory language permitting “regulation of importation” could not sustain such consequential action.

Justices Sotomayor, Kagan, and Jackson agreed that the IEEPA tariffs were unlawful. Their views are based on the statutory text alone, without reliance on the major questions doctrine. Justice Kagan explained in her concurrence that the Administration’s arguments failed even under ordinary principles of statutory interpretation.

The majority opinion declined to address whether the President could impose similar tariffs under other tariff statutes. The Supreme Court thus left open the possibility of renewed tariffs under alternative authorities.

Dissent and open questions

Justice Kavanaugh’s dissent—joined by Justices Thomas and Alito—would have held that IEEPA’s text and historical context authorize tariffs and that the major questions doctrine does not apply in the realm of foreign affairs. The dissent warned that the Court’s decision could require the government to refund billions of dollars in duties already collected—“a mess” according to Justice Kavanaugh--and observed that the Administration may replace the IEEPA tariffs using different authorities.

Jurisdiction and unresolved remedies

The Supreme Court affirmed that the U.S. Court of International Trade (CIT) has exclusive jurisdiction over challenges to tariffs. The Court did not, however, provide guidance on possible remedies or refunds. As a result, we anticipate further litigation to address the treatment of previously paid duties and the mechanics of any refund process. Approximately 2,000 tariff refund lawsuits are already pending in the CIT, which has already entered into dialogue with the Government and plaintiffs over the course of possible refunds.

Administration responds with immediate trade actions

President Trump has already announced new measures designed to maintain the Administration’s tariff framework under alternative statutory authorities. Several executive orders have been issued to minimize the potential for imports to enter without being subject to tariff.

IEEPA tariffs terminated

The Administration formally terminated the IEEPA tariffs, directing that such duties “shall no longer be in effect and, as soon as practicable, shall no longer be collected.”

U.S. Customs and Border Protection (CBP) has not yet issued operational guidance on how it will implement this instruction.

New global tariffs under Section 122

The Administration announced that it would impose a new tariff under Section 122 of the Trade Act of 1974, effective February 24. President Trump initially ordered that the Section 122 tariff would be 10% ad valorem, subsequently announcing it would be raised to 15%. On February 23, CBP issued instructions for collecting 10% ad valorem Section 122 duties (pending any further changes from the Administration). Features of the new Section 122 tariff include:

• Application across all countries, consistent with the statute;
• Exemptions for goods qualifying for preferential treatment under USMCA; and
• Product-specific exclusions largely mirroring those provided under the IEEPA tariffs.

Section 122 permits the tariff to be in effect for 150 days, unless Congress votes to extend them. As a result, the new tariff is scheduled to expire in late July absent congressional action.

Suspension of De minimis treatment continues

The Administration has continued to suspend de minimis duty-free treatment for low-value imports. De minimis shipments are now subject to the Section 122 tariff.

In addition, the Administration retains independent authority under the Tariff Act of 1930 to curtail de minimis treatment through regulation. As such, the suspension is likely to persist beyond the expiration of the Section 122 tariffs.

New Section 301 investigations anticipated

The Administration has signaled that it will impose new tariffs under Section 301 of the Trade Act of 1974, replacing at least some of the tariffs imposed under IEEPA. U.S. Trade Representative (USTR) Jamieson Greer announced that expedited investigations are expected to be launched against most major trading partners. USTR’s areas of focus will include:

• Industrial overcapacity;
• Pharmaceutical pricing practices;
• Digital services taxes and discrimination against U.S. technology companies;
• Forced labor;
• Environmental and ocean pollution concerns; and
• Trade practices affecting seafood, rice, and other agricultural products.

The Administration intends to accelerate the Section 301 investigation process. Specifically, it is likely that the Section 301 tariffs will take effect before the Section 122 tariff expires. The Administration may also seek to impose additional tariffs under different statutory authorities (e.g., Section 232).

Refunds: A central issue for importers

The Supreme Court did not address whether importers are entitled to refunds of IEEPA tariffs already paid. President Trump and other Administration officials have suggested that the resolution of refund claims may take years, requiring extensive litigation.

The Supreme Court held that the CIT has jurisdiction to hear refund claims. In ongoing CIT litigation seeking refunds, the Department of Justice repeatedly represented that importers would receive refunds, with interest, if the IEEPA tariffs were held unlawful by the Supreme Court. The CIT relied on those representations in granting stays of the pending refund cases.

Importers that paid IEEPA tariffs should evaluate their legal options promptly, including analyzing whether to file a refund lawsuit in the Court of International Trade. A key question in this evaluation is whether importers have entries on which IEEPA tariffs have been paid that are about to be liquidated by U.S. Customs and Border Protection.

Trade agreements currently remain in force

The Administration has indicated that recent trade agreements negotiated by the President will remain in effect, notwithstanding that they may rely on IEEPA as the statutory authority to set tariff rates. Negotiated agreements already in force are thus expected to be maintained absent further negotiations or challenges to tariff rates set pursuant to IEEPA. The Administration is likely to rely on different statutory authorities to continue its negotiations with other trading partners.

Authored by Mayur Patel, Joshua Kurland, Katherine Wellington, and Jonathan Stoel.