On February 20, the U.S. Supreme Court released its decision in Learning Resources, Inc. v. Trump, the case challenging the legality of the Trump Administration’s tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). By a 6-3 majority, the Court held that IEEPA does not authorize the President to impose tariffs. In the wake of this decision, President Trump issued a number of executive orders (“EOs”) and proclamations to terminate tariffs imposed under IEEPA, and to put in place replacement tariffs under Section 122 of the Trade Act of 1974. This alert summarizes these recent actions, considers additional tariff actions the Trump Administration is expected to roll out in the coming weeks, and addresses remaining uncertainties regarding the process for obtaining IEEPA tariff refunds.
In the immediate aftermath of these developments, companies that have paid meaningful IEEPA tariffs should evaluate the specific procedural posture of their entries and take steps in the near term to preserve their refund rights. Such steps may include litigation, particularly for entries that liquidated prior to the Supreme Court decision. Covington’s trade team can advise on the appropriate course of action and also address questions relating to how to handle specific entries.
Following months of anticipation, the Supreme Court issued a decision on February 20 holding that the wave of tariffs imposed in 2025 by the Trump Administration based on the President’s authority under IEEPA were unlawful.
Chief Justice Roberts wrote the majority opinion, and was joined by Justices Barrett, Gorsuch, Jackson, Kagan, and Sotomayor. Justice Kavanaugh wrote the principal dissent, with Justices Thomas and Alito joining. The majority focused on the fact that imposing tariffs is not one of the enumerated actions that IEEPA authorizes the President to take. Specifically, it held the power to “regulate… importation” is distinct from the power to tax, which is the unique prerogative of Congress under the Constitution. Because tariffs are a form of taxation, the majority concluded that “had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly—as it consistently has in other statutes.”
Following the Supreme Court decision, President Trump issued a Proclamation on February 20 terminating tariff measures previously imposed under IEEPA. U.S. Customs and Border Protection (“CBP”) later issued guidance confirming that duties imposed under IEEPA would no longer be collected for goods entered for consumption or withdrawn from warehouse for consumption after 12:00 a.m. ET on February 24, 2026.
In a separate EO also issued on February 20, President Trump continued the suspension of de minimis treatment, which previously allowed duty-free treatment for low-value shipments under 19 U.S.C. § 1321(a)(2)(C). President Trump previously suspended de minimis treatment last year in EOs invoking his authority under IEEPA. In this new EO, President Trump asserted that the unavailability of tariff-setting authority under IEEPA did not impact his authority under IEEPA to suspend de minimis treatment.
In another Proclamation issued February 20, the President imposed a new 10 percent tariff under Section 122 of the Trade Act of 1974 (“Section 122”). Section 122 authorizes the President to impose tariffs up to 15 percent to address “large and serious” U.S. balance-of-payments deficits, or to prevent an “imminent and significant” depreciation of the U.S. dollar. Such tariffs must generally be imposed on a non-discriminatory basis and for no more than 150 days, unless extended by Congress. Until now, Section 122 has never been used. Under the February 20 Proclamation, the new 10 percent tariff applies to products from all countries beginning 12:01 a.m. on February 24 for the full 150-day period (until July 24, 2026).
On February 21, just one day after issuing the Proclamation, President Trump indicated in a Truth Social post that he planned to increase the Section 122 tariff to 15 percent, the maximum rate allowed by the statute. However, to date, he has not taken any formal action to implement that increase. Rather, on February 23, CBP issued guidance confirming that the 10 percent tariff would take effect as scheduled. While U.S. officials have suggested that they are still an increase to 15 percent, “where appropriate,” it is unclear whether this would be consistent with the requirements of Section 122.
The Proclamation establishes several exemptions from Section 122 duties, many of which cover products that were previously exempt from certain IEEPA tariffs. Articles exempt from Section 122 include:
- Articles listed in Annex II of the Section 122 Proclamation, which include certain critical minerals, energy products, natural resources, agricultural products, pharmaceuticals and pharmaceutical ingredients, certain electronics, and certain aerospace products, among others;
- Articles subject to Section 232 tariffs (though the Proclamation clarifies that, where Section 232 tariffs apply only to a portion of an article’s value, Section 122 tariffs will apply to the remainder);
- Goods that are compliant with the U.S.-Mexico-Canada Agreement (“USMCA”);
- Textile and apparel articles entered under the Dominican Republic-Central America Free Trade Agreement (“CAFTA-DR”);
- Donations, such as food, clothing, and medicine, intended to be used to relieve human suffering; and
- Informational materials, such as publications, films, and artworks, among others.
The Proclamation also establishes an “on the water” exception for goods that were loaded onto a vessel and in transit on the final mode of transit prior to entry into the United States before 12:01 a.m. ET on February 24, 2026, and that are entered for consumption, or withdrawn from warehouse for consumption, before 12:01 a.m. ET on February 28, 2026.
Whether and how refunds of IEEPA tariffs collected on past imports will be made available remains uncertain. While the Supreme Court made clear that tariffs imposed pursuant to IEEPA are unlawful and invalid ab initio, the majority did not address the question of remedies. Even in a scenario where the Administration does not oppose issuance of refunds, there are significant operational and administrative questions as to how CBP might process and issue refunds across entries that have a range of procedural postures (i.e., unliquidated, liquidated but protestable, and finally liquidated).
As debates regarding remedies take place before U.S. courts and within the Administration, it is important for importers to evaluate the specific procedural posture of their entries before CBP and take steps in the near term to preserve their rights based on the status of each individual entry. In particular, it is critical to gather details as to the liquidation dates of entries on which IEEPA tariffs were paid (including whether the entries liquidated before or after the Supreme Court’s decision), calculating deadlines for the submission of post summary corrections (“PSCs”), and determining the date by which protests of liquidated entries must be filed. This information is essential for importers who wish to procedurally preserve their right to obtain refunds. Importers should also evaluate filing litigation soon directly against CBP, especially if significant IEEPA duties were paid on entries that liquidated prior to the Supreme Court decision. In addition, early reports out of the Administration suggest that CBP may require a court order before issuing any refunds.
While there may be a potentially significant period of uncertainty before refund questions are definitively resolved, our Customs team can help you address questions about how to handle any specific entries and help preserve your right to tariff refunds—both through the CBP administrative process as well as through litigation.
By definition, the tariffs imposed by the Trump Administration under Section 122 are temporary, and the Administration has already announced plans to initiate additional trade actions in the coming weeks under other statutory authorities that authorize imposition of tariffs over a longer term. In particular, U.S. Trade Representative Jamieson Greer announced that his office will be initiating new investigations under Section 301 of the Trade Act of 1974 concerning major trading partners, which would proceed on an expedited basis.
The Administration may also revisit existing or completed sector-specific trade actions under Section 232 of the Trade Expansion Act of 1962, as well as consider new investigations against additional sectors—perhaps including large-scale batteries, cast iron and iron fittings, plastic piping, industrial chemicals, and power grid and telecom equipment.
The Administration has negotiated several trade deals with foreign countries premised on commitments that the United States would lower IEEPA tariffs on a bilateral basis. While the Administration has claimed that these deals “remain in full effect,” some U.S. trading partners—including the EU, Japan, and India—have asked for clarification regarding U.S. plans for new tariffs following the termination of IEEPA tariffs.
Some countries may view the imposition of Section 122 tariffs as inconsistent with U.S. commitments under these recent trade deals. In particular, Annex I of the Section 122 Proclamation indicates that Section 122 tariffs will stack on top of most-favored nation (“MFN”) tariff rates, in which case the resulting cumulative tariffs may at times exceed the maximum tariff rates the United States agreed to under various trade deals. This issue will be more widespread if the Section 122 tariff rate is increased to 15 percent, as President Trump has threatened. Affected trade deals would likely include the U.S.-UK agreement—which establishes a 10 percent maximum U.S. tariff for most goods—as well as U.S. agreements with the EU, Japan, Korea, and Switzerland and Lichtenstein, which establish a maximum U.S. tariff rate of 15 percent, inclusive of MFN tariff rates.
For other trading partners, the invalidation of IEEPA tariffs seems less likely to disrupt existing trade deals. The Supreme Court’s decision may enhance political opposition to such deals among domestic stakeholder in those countries, but foreign governments may be disinclined to withdraw from or seek revisions to existing deals. As the President himself has emphasized in recent days, he still has significant policy tools that provide leverage even without IEEPA—including other tariff authorities and various non-tariff tools under IEEPA. For that reason, the cost-benefit analysis driving countries to the negotiating table will not have changed in any meaningful way in most instances. It also remains to be seen how future U.S. trading partners will react to future U.S. actions to impose replacement tariffs on a longer-term basis under Section 301, Section 232, or other authorities.
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If you have any questions concerning the material discussed in this client alert, please contact the members of our Trade Policy practice.
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