International Emergency Economic Powers Act Tariffs Are Out, Section 122 Tariffs Are In - What Importers Need To Know And Do

On February 20, 2026, the U.S. Supreme Court issued its eagerly anticipated decision in Learning Resources, Inc. v. Trump. Significantly, in its decision, the Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs, which served to invalidate all IEEPA-based tariffs that had been enacted since February 1, 2025. Notably, the Court did not discuss the issue of IEEPA tariff refunds in its decision. As a result, many questions remain about how importers can seek refunds of the IEEPA tariffs that they have paid. On February 24, 2026, importers in the lead case on the legality of tariffs imposed under the IEEPA filed a motion at the U.S. Court of Appeals for the Federal Circuit for the "immediate issuance of the mandate" so that the U.S. Court of International Trade (CIT) may proceed with adjudicating the issue of IEEPA tariff refund payments (V.O.S. Selections v. Donald J. Trump, Fed. Cir. # 25-1812). In light of this filing, importers may wish to consider initiating suits at the CIT in addition to filing appropriate submissions with U.S. Customs and Border Protection. Both of these options require that importers confer with their advisors and compile records of all affected entries as soon as possible, including entry summaries, payment documentation and any post-summary corrections or protests that have previously been submitted to U.S. Customs and Border Protection.

Within hours of the issuance of the Court's ruling, President Donald Trump and other members of his administration stated that other statutory authorities would be used to continue to impose tariffs, including Section 122 of the Trade Act of 1974, among others. As a result, importers will need to continue to monitor trade developments closely and consider tariff mitigation strategies as well as state and local sales tax refund opportunities. Depending on the situation, such strategies could involve renegotiating contracts with suppliers, restructuring supply chains, and designing and implementing effective customs strategies (e.g., country of origin and tariff engineering and the first sale rule).

Background on IEEPA Tariffs and the Legal Challenges Brought Against Them

IEEPA Tariff Imposition

On February 1, 2025, President Trump stated that the international opioid trafficking crisis constituted a national emergency and then relied on IEEPA to issue three executive orders to impose IEEPA-based tariffs on Canada (Executive Order 14193), Mexico (Executive Order 14194) and China (Executive Order 14195). Subsequently, again relying on IEEPA, the president issued Executive Order 14257 on April 2, 2025, pursuant to which a reciprocal tariff regime was created to address the declared national emergency caused by trade deficits. Between mid-April 2025 and mid-February 2026, the United States leveraged the reciprocal tariffs to negotiate either framework or final "trade deals" with approximately 20 U.S. trading partners, which include country-specific tariff rates.

Legal Challenges to IEEPA Tariffs

Numerous legal challenges were filed contesting the legality of the tariffs imposed pursuant to IEEPA. On May 28, 2025, in consolidated cases, the CIT held that the president's emergency declarations relating to the trafficking tariffs and the reciprocal tariffs did not establish a qualifying "unusual and extraordinary threat" under IEEPA and that the tariffs therefore exceeded the authority granted by Congress. See V.O.S. Selections, et al., v. United States, et al., Slip Op. 26-66, Consol. Ct. No. 25-00015 (Ct. Int'l Trade May 28, 2025). On the following day, the U.S. District Court for the District of Columbia ruled that the emergency declarations were insufficient under IEEPA and that the tariffs violated constitutional separation of powers principles. See Learning Resources. Inc. v. Trump, No. 1:25-cv-01248-RC, 2025 WL 1525376 (D.D.C. May 29, 2025).

The government appealed the CIT's decision to the U.S. Court of Appeals for the Federal Circuit and the D.C. District Court's decision to the U.S. Court of Appeals for the D.C. Circuit. On August 29, 2025, in a 7-4 en banc decision, the Federal Circuit affirmed the CIT's decision and held that, although IEEPA grants the president authority to "regulate" foreign commerce, this does not include imposing sweeping tariffs without limits on scope, amount or duration. See V.O.S. Selections, Inc. v. Trump, Nos. 25-1812, -1813 (Fed. Cir. Aug. 29, 2025) (en banc) (per curiam).

Following the issuance of the Federal Circuit's ruling, the government filed a petition for certiorari in V.O.S. Selections with the Supreme Court. Separately, the Learning Resources plaintiffs filed a petition for certiorari before judgment with the Court. In early September 2025, the Court granted the petitions and consolidated the cases. On November 5, 2025, the Court held oral argument in the consolidated cases. Subsequently, while waiting for the Court to issue its decision, approximately 2,000 importers filed cases with the CIT challenging the IEEPA tariffs and seeking to protect their ability to obtain refunds of IEEPA tariffs in the event of a favorable Court decision.

The U.S. Supreme Court Decision in Learning Resources, Inc.

On February 20, 2026, the Court issued its decision in Learning Resources, Inc. v. Trump. In its ruling, the Court held that IEEPA does not authorize the president to impose tariffs.

Chief Justice John Roberts delivered the 6-3 majority opinion, joined in full by Justices Neil Gorsuch and Amy Coney Barrett, and joined in part by Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson. Essentially, the Court's decision was predicated on its finding that, in enacting IEEPA, Congress did not delegate to the president the authority to impose tariffs. In making that finding, the Court emphasized that Congress notably did not include "any mention of tariffs or duties" in IEEPA. The Court further explained that the power under IEEPA to "regulate ... importation" cannot be read to include tariffs because the power to regulate does not include the power to tax. Accordingly, the Court affirmed the U.S. Court of Appeals for the Federal Circuit's en banc decision in V.O.S. Selections.

The Court also held that the CIT has exclusive jurisdiction over challenges to IEEPA tariffs under 28 U.S.C. § 1581(i) since challenges arise out of modifications to the Harmonized Tariff Schedule and therefore arise out of a law "providing for tariffs." Accordingly, the Court vacated the D.C. District Court decision in Learning Resources. However, given that the Court has held that IEEPA tariffs are unlawful, vacating the decision has little practical effect.

Significantly, in its decision, the Court did not address the issue of refunds of IEEPA tariffs. In fact, Justice Brett Kavanaugh went further in his dissent and noted that the refunds of IEEPA tariffs would "have significant consequences for the U.S. Treasury" and that the Court "says nothing today about whether, and if so how, the Administration should go about returning the billions of dollars that it has collected from importers." Learning Resources, Inc., slip op. at 170 (Kavanaugh, J., dissenting).

The Administration's Reactions to the Court's Decision

Within hours of the Court's decision, the president and other members of his administration expressed considerable dissatisfaction with the Court's ruling and reiterated that tariffs would continue be a key focal point of U.S. trade policy. They noted that the administration has already been imposing significant tariffs under different statutory authorities that were not affected by the Court's decision, including Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, and they further indicated that the administration plans to increase significantly its use of Section 232 and Section 301 during 2026.

During a press conference following the Court's decision, the president also stated that he planned to use Section 122 of the Trade Act of 1974 to impose a global tariff. Pursuant to Section 122, the president may impose "temporary import surcharges" (i.e., tariffs) not exceeding 15 percent ad valorem for a maximum of 150 days to address fundamental international payments problems, including large balance-of-payments deficits or imminent dollar depreciation. Significantly, Section 122 requires congressional approval for extensions beyond 150 days. However, it remains unclear whether the president may terminate use of a Section 122 action before the 150-day deadline expires and then simply initiate a new Section 122 action, which could establish a new 150-day clock.

Consistent with his statement, on February 20, 2026, the president issued a proclamation to establish a 10 percent global tariff pursuant to Section 122. The proclamation stated that the new tariff would enter into effect for imports made on or after at 12:01 a.m. Eastern Standard Time on February 24, 2026—except that there is an "in-transit" exception for products that were loaded on board an ocean vessel and were on the water prior to February 24, 2026, and that were entered for consumption or withdrawn from warehouse for consumption before 12:01 a.m. Eastern Standard Time on February 28, 2026. The proclamation excludes certain goods, including goods previously exempted from IEEPA tariffs (e.g., USMCA-qualifying goods from Canada and Mexico; goods subject to Section 232 tariffs; critical minerals; pharmaceuticals; certain electronics) and goods exempted from IEEPA tariffs under country-specific trade deals (e.g., certain civil aircraft and aircraft parts and certain textiles). The tariff provisions imposing the Section 122 tariffs and relevant exemptions are available in Annex I of the proclamation. The full list of exemptions is available in Annex II.

On February 20, 2026, the president also issued two executive orders. The first executive order mandated that tariff payments continue to be made on low-dollar shipments (i.e., de minimis treatment remains suspended for all countries). The second executive order served to revoke the IEEPA tariffs. The revocation-related executive order stated that the IEEPA tariffs "shall no longer be in effect and, as soon as practicable, shall no longer be collected" and directed administration officials to make such modifications to the Harmonized Tariff Schedule as may be necessary to effectuate the order. However, the executive order did not address the issue of refunds of IEEPA tariffs.

On February 21, 2026, President Trump announced that he would immediately increase the Section 122-related tariff rate from 10 percent to the maximum tariff rate of 15 percent. However, as of the time of this writing, the administration has not yet actually increased the Section 122-related tariff rate to 15 percent. In fact, on February 23, 2026, U.S. Customs and Border Protection issued guidance confirming that the Section 122 tariff rate is currently 10 percent.

About Duane Morris

Given the significant developments in U.S. trade policy and the ongoing uncertainty surrounding tariff enforcement and refund procedures, Duane Morris' Tariff Mitigation Task Force continues to assist clients navigating this complex environment. The task force consists of a multidisciplinary group of professionals with extensive experience in industries heavily impacted by tariffs, including automotive, construction, energy, fashion, retail, consumer products, life sciences, pharmaceuticals, electronics and semiconductors. Our team provides assistance in developing tariff mitigation strategies that optimize supply chains, minimize disruptions and identify opportunities to recover tariff-related costs—including pursuing refund claims arising from the Supreme Court's IEEPA tariff decision.

For More Information

If you have any questions about this Alert, please contact Geoffrey M. Goodale, Hope P. Krebs, Thomas R. Schmuhl, Eduardo Ramos-Gómez, Brian S. Goldstein, Raul Rangel Miguel, Laura M. González Alemán, any of the attorneys in our firm's Tariff Mitigation Task Force or the attorney in the firm with whom you are regularly in contact.