On February 20, 2026, the Supreme Court of the United States issued a significant decision holding that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose broad-based tariffs absent clear congressional delegation. The ruling reshapes the legal framework surrounding executive trade authority and creates immediate strategic considerations for importers, multinational groups, and supply chain leaders.

This alert outlines what the decision means in practical terms, the likelihood and timing of refunds, the consideration of protective filings, and the transfer pricing consequences businesses should evaluate now.

Understanding the Supreme Court's Decision in Plain Terms

At issue was a significant expansion of executive authority: using a 1977 emergency powers law — IEEPA — to justify sweeping tariffs on imports from dozens of countries, purportedly to protect U.S. industry from "unusual and extraordinary threats."

The Supreme Court's majority concluded:

  • Tariffs are taxes and duties — a power the Constitution entrusts to Congress, not the President, unless Congress clearly says so.
  • IEEPA does allow the President to regulate certain aspects of international economic relations during emergencies but does not explicitly authorize tariff imposition.
  • Because Congress never included clear language granting tariff authority in IEEPA, the statute cannot serve as a lawful basis for the broad tariff scheme at issue.

As a result, tariffs imposed under IEEPA are unlawful — and potentially subject to refund claims for importers who paid them. Estimates from independent analysts suggest over $160 billion to $175 billion in tariff collections could be subject to reimbursement.

The Court's Holding and Immediate Impact

The Court concluded that tariffs—because they function as taxes or duties—fall within Congress's constitutional authority under Article I, Section 8. While IEEPA permits regulation of certain international economic transactions during declared emergencies, it does not explicitly authorize the imposition of sweeping tariffs. Without clear statutory language granting tariff power, the executive action exceeded permissible authority.

The ruling invalidates the use of IEEPA as a standalone tariff authority, including the fentanyl related tariffs imposed on Canada, China and Mexico. However, it does not automatically erase all U.S. tariffs, because:

  • Certain sector-specific tariff authorities — such as Section 232 (national security tariffs) and ongoing Section 301 investigations — remain in force under separate statutes.
  • The ruling does not immediately order refunds or outline a refund process. That issue is expected to play out in the lower courts and through administrative procedures with U.S. Customs and Border Protection (CBP).

How the President Might Respond Legally

While IEEPA is no longer a tariff authority, the Executive Branch still has other statutory pathways to impose trade measures, though each comes with its own legal and procedural framework:

1. Section 122 of the Trade Act of 1974 - authorizes temporary tariffs (up to 15 %) for up to 150 days without a full investigation before Congress must act.

2. Section 301 of the Trade Act of 1974 - permits tariffs in response to unfair trade practices after an investigation process.

3. Section 232 of the Trade Expansion Act of 1962 - allows tariffs if imports threaten national security.

4. Section 201 (safeguard measures) and Section 338 - additional statutory options with specific triggers, limitations, and often extensive procedural requirements.

In fact, within a day of the ruling, the White House has signaled they are reimposing a 15% global tariff under Section 122, and pursuing new Section 301 investigations, highlighting that tariff policy continued shifts rather than disappearance. Future trade actions may be more procedurally structured and narrower in scope, but tariff volatility has not disappeared. Each pathway requires distinct evidence, investigation timelines, and legal justification - meaning that future tariff actions could be more targeted, slower to implement, and more defensible against legal challenges than the broad IEEPA regime. Businesses should continue to scenario-model exposure and avoid assuming a stable tariff duty environment.

Refunds: Real Opportunity, but Not Immediate Cash Flow

Importers that paid duties under IEEPA now have a credible legal pathway to pursue refunds. That said, businesses should not assume automatic repayment or near-term recovery.

The likelihood of refunds is strong where entries were assessed exclusively under IEEPA authority. However, recovery will depend on entry status, protest rights, procedural compliance, and forthcoming guidance from U.S. Customs and Border Protection.

From a timing perspective, companies should anticipate a staged process. Initial administrative clarification may take several months. Broader litigation over scope and methodology could extend the timeline further. In large-scale refund environments historically, processing can take many months, if not over a year, particularly if substantial volumes of entries are implicated. Businesses should treat potential refunds as contingent assets for planning purposes until procedural clarity emerges.

Protective Summary Corrections and Protest Strategy: Steps to Take Now to Preserve Rights

One of the most important immediate actions for importers is evaluating protective filing options. For unliquidated entries, Protective Summary Corrections (PSCs) may be used to preserve refund claims and document disputes related to IEEPA-assessed duties. Once entries liquidate, the ability to amend diminishes significantly, and formal protests, typically required within 180 days of liquidation, become the primary vehicle to preserve rights. Failure to act within applicable statutory windows could permanently waive recovery opportunities.

Companies should promptly conduct an entry review to identify affected transactions, determine liquidation status, and calendar relevant deadlines. Close coordination among customs brokers, trade counsel, and internal compliance teams is critical to ensure procedural protections are in place while administrative guidance evolves.

Transfer Pricing Implications: A Cross-Functional Imperative

The ruling has significant implications for multinational companies operating under intercompany pricing structures. If refunds are ultimately issued, companies must determine how those recoveries are treated within their transfer pricing model. Duties may have been embedded in cost of goods sold or absorbed at the U.S. importer level, affecting tested party margins and year-end profitability outcomes. Refunds could necessitate compensating adjustments, revised true-ups, or amendments to intercompany settlements.

Alignment between customs valuation and transfer pricing positions will be particularly important. Businesses should reassess whether existing pricing policies, royalty structures, and service allocations remain appropriate under a potentially reduced tariff environment. Advance Pricing Agreements (APAs) and contemporaneous documentation may require updates if material assumptions change.

Importantly, both customs authorities and the IRS will expect consistency between declared customs value and transfer pricing outcomes. A coordinated review between tax and trade functions, collaborative efforts of all teams and expertise from operations to accounting and legal, is advisable to mitigate audit risk.

Actionable Steps for Business Owners

For businesses that import goods, manage global supply chains, or rely on tariff-exposed inputs, the Court's decision creates both opportunities and uncertainties. Here are proactive steps to undertake now:

1. Work with Your Customs Broker to Assess Refund Opportunities

· Determine which entries were assessed IEEPA tariffs and which tariff codes were involved.

· Prepare to file protests or post-entry adjustments where appropriate - many importers may have 180 days from liquidations to request refunds once guidance is issued.

· Coordinate closely with legal counsel and your customs broker to track CBP and Treasury guidance as it emerges.

2. Audit Your Tariff Exposure and Cost Models

· Revisit landed cost models that assumed continuation of IEEPA tariffs.

· Adjust forecasting for cost of goods, pricing strategies, and supply chain routing now that many tariffs may be reversed or replaced with different rates.

3. Monitor New Trade Actions and Investigations

· Stay abreast of Section 122, 301, or 232 actions - including which products are targeted, the basis for justification, and timelines.

· Engage with industry groups and trade associations to advocate for predictable, economically justified measures rather than broad tariff swings.

4. Review Supply Chain Contracts

· Assess clauses related to tariff cost allocation, supplier price adjustments, and force majeure in light of volatile tariff environments.

· Consider fixing pricing or exploring alternative sources where tariff risk remains significant.

5. Strengthen Compliance & Documentation

· Ensure your trade compliance processes capture classification, valuation, country of origin, and tariff assessment accurately — which will be critical for refund claims and future audits.

This is a moment that requires disciplined procedural action as well as strategic financial planning.

Conclusion

The Supreme Court's decision reinforces constitutional limits on executive tariff authority while opening the door to potentially significant duty recovery for importers. At the same time, it does not eliminate trade policy uncertainty. The President's ongoing use of alternative tariff authorities and potential future legislative responses underscores the need for businesses to remain engaged with both regulatory developments and federal legislative trends.

In the coming months, expect:

  • Clarification from CBP and lower courts on refund procedures.
  • New tariff proceedings under different statutes.
  • Continued litigation as stakeholders challenge or defend these measures.

Businesses that move quickly to preserve claims, align trade and tax functions, and proactively manage supply chain risk will be best positioned to navigate the evolving tariff landscape.