Supreme Court overturns US tariffs – refunds for companies?

The International Emergency Economic Powers Act (IEEPA) does not authorize the President of the United States to impose tariffs, since only Congress holds the constitutional authority to levy taxes and duties, and the wording of the IEEPA does not expressly confer customs authority to the executive branch.

This is the result of a momentous decision by the United States Supreme Court, which was rendered last Friday by six of the nine Supreme Court justices. 

The Supreme Court (SCOTUS) stated:

• The IEEPA authorizes the President to “regulate imports.” However, this term does not include the power to generate revenue through tariffs or duties, as this is a core element of tax sovereignty, which is reserved for Congress.
• Allowing the executive branch to impose unlimited tariffs on global trade without explicit legal authorization would disrupt the constitutional separation of powers and undermine the “major questions doctrine”, according to which executive actions with far-reaching economic and political consequences may not be taken without clear authorization from the US Congress.

These tariffs will be eliminated

The ruling is final and took immediate effect. Consequently, all customs duties imposed on the basis of the IEEPA are abolished with immediate effect:

• IEEPA base tariff of 10%, which applied to all countries except Mexico, Canada, and USMCA-compliant goods.
• Country-specific surcharges, e.g., 15% for the EU. 
• Emergency regulations, i.e., tariffs related to the fentanyl crisis (China) and border security (Canada and Mexico).
• The tariff floor, which prevented other tariff instruments from falling below the IEEPA rates.

These tariffs remain in effect

Tariffs imposed on a basis other than the IEEPA remain in effect. These include, for example, tariffs on steel, aluminum, copper, lumber, and motor vehicles/auto parts (Section 232 – National Security), the tariffs imposed on Chinese goods in 2018/2019 (Section 301 – Trade Practices), and the regular most-favored-nation (MFN) and preferential tariff rates (HTS base rates).

Thus, the average tariff rate for imports into the US will fall back to the level of January 2025. 

The Supreme Court's decision only prevents the president from imposing tariffs under emergency laws. It does not prevent him from imposing tariffs on other legal grounds. 

What does this mean for importers?

There will be no automatic refund of IEEPA duties paid. SCOTUS leaves questions regarding the reimbursement of wrongfully paid import duties to the competent lower courts.

Companies and individuals who have paid these IEEPA duties must therefore proactively apply to the US Customs Service for a refund or recalculation of the duties, in accordance with the deadlines and formal requirements stipulated by US law. 

If you are affected by IEEPA duties, please contact us! Together with our Baker Tilly US Customs team, we will review your refund options and help you enforce them in the regulatory jungle of US customs law.  

As announced on Monday, the European Union is suspending ratification of the trade agreement with the US for the time being as a result of the Supreme Court ruling and the executive orders in connection with new temporary additional tariffs of ten percent. It first wants to wait for further details from the United States on its new tariff policy. We are monitoring the current developments and will be happy to advise you.