How the Supreme Court’s IEEPA Ruling Could Recast US Tariffs

The Court appears closely divided, with multiple justices probing whether the language of the IEEPA statute can be read to include tariffing measures, and whether (if IEEPA authorizes the tariffs) Congress overstepped its power to delegate tariffing authority to the Executive Branch. In this update, we provide information to help you stay informed about the proceedings before the Court and the potential impact of the Court’s upcoming decision.

While the Court’s decision could range from wholly upholding to invalidating the tariffs, narrower paths are also in play. At least for now, importers of record remain liable for paying the IEEPA tariffs, and companies, particularly those with China‑centric supply chains, face layered exposures. Consequently, it will be important to pay attention to whether the Court strikes down any portion of the IEEPA tariffs, and if so, how importers can obtain refunds for those tariffs. Below, we recommend proactive steps that importers can take to preserve all options for obtaining refunds in the event that the Court invalidates some or all of the IEEPA tariffs. Whatever the outcome of the Court’s decision, the case will have profound implications for US trade policy, congressional control over tariff authority, and the permissible scope of presidential action in national emergencies affecting foreign commerce.

Key Takeaways

• While the case proceeds at the Court, importers of record remain liable for tariffs assessed under the IEEPA proclamations while the final orders (or mandates) are stayed and while disposition of the US Court of International Trade’s (CIT) injunction remains pending.
• Companies with China-focused supply chains are most exposed given the layered tariff structure and lack of exemption (e.g., United States-Mexico-Canada Agreement exemption for Canada and Mexico). However, the universal 10% duty and country-specific rates that can range up to 41% have broad reach across virtually all sectors.
• While the issue of whether refunds will be provided on a retroactive basis has not been decided, importers who have remitted IEEPA-related tariffs should take the necessary steps to ensure recovery of potential duties. Such steps include tracking import data to find affected entries and identifying whether affected entries have liquidated.

Background

President Trump issued two buckets of tariffs pursuant to IEEPA. First, Trump took executive action imposing tariffs on Canada, Mexico, and China in response to supposed threats posed by international drug cartels and trafficking organizations.[1] These tariffs are commonly referred to as the IEEPA trafficking tariffs or the IEEPA fentanyl tariffs. According to the Administration, these tariffs “deal with” the flow of illicit drugs (focusing on opioids), human trafficking, and related criminal activity, particularly at the US southern and northern borders. Trump also cited the failure of the foreign governments to adequately address these threats.

Second, Trump invoked IEEPA to impose a broad 10% tariff on all imports (regardless of country of origin) and higher country-specific rates ranging from 11% to 50% on all imports from 57 countries.[2] These tariffs are commonly referred to as the IEEPA reciprocal tariffs. The rationale for these tariffs was that “large and persistent annual U.S. goods trade deficits” amounted to a national emergency. Trump claimed that the tariffs would counter perceived unfair trade practices and economic policies of other countries that contributed to these deficits.

Shortly after the tariffs went into effect, various parties — ranging from small educational businesses to state governments — challenged the legality of the tariffs in various federal courts. Ultimately, the challenges were heard by two different federal trial courts: the federal district court for the District of Columbia and the CIT.[3] Below, we focus on the proceedings before the CIT. 

Procedural Posture

On May 28, the CIT issued an opinion finding that IEEPA did not authorize the trafficking tariffs or the reciprocal tariffs and permanently enjoined the government from enforcing the tariffs.[4] Just a day later, the DC District Court also found that IEEPA does not allow for the president to impose tariffs, albeit for slightly different reasons than the CIT.

The government appealed the CIT’s decision to the US Court of Appeals for the Federal Circuit and the DC District Court’s decision to the Court.

On August 29, the full Federal Circuit agreed that the president could not use IEEPA to impose the trafficking or reciprocal tariffs.[5] However, the court put the nationwide injunction on pause given recent Court guidance on nationwide relief. The Federal Circuit sent the injunction issue back to the trial court so that the trial court can consider the impact of recent Court cases on the scope of the requested injunction. The Federal Circuit also put its ruling on hold — meaning that nothing changes until the Court issues its decision. 

Supreme Court Proceedings

On September 9, the Court granted certiorari, meaning it will hear appeals of the Federal Circuit’s decision and the DC District Court’s decision.

Two issues are at the center of the appeal before the Court. The first issue concerns the “major questions” doctrine. Under the major questions doctrine, courts decline to find that a statute authorizes vast economic and politically significant action, unless there is clear language conferring such authority in the statute. The IEEPA statute allows the president “under such regulations as he may prescribe, by means of instructions, licenses, or otherwise” to “regulate … importation.”[6] However, the statute does not use the term “tariff,” “duty,” “tax,” or any synonym of those terms. The question is whether the language in IEEPA is sufficiently clear to permit the type of tariffs President Trump has imposed.

The second issue is, assuming for the sake of argument that the IEEPA statute authorizes the tariffs, whether such authorization violates the “nondelegation doctrine.” The nondelegation doctrine provides that when Congress delegates authority to the Executive Branch, it must provide reasonable processes to check that authority. Here, the question is whether IEEPA’s delegation of Congress’ authority to tariff imports (if IEEPA delegates that authority) violates the nondelegation doctrine.

The government argued that “regulate importation” has always encompassed tariffs, that delegations in the foreign affairs or national security sphere are constitutionally permissible given the president’s role, and that eliminating IEEPA tariff authority would jeopardize national security, foreign policy, and the economy.

Appellees countered that the power to “regulate” is distinct from the power to “tax,” that IEEPA never mentions tariffs or duties, that the asserted “emergencies” are not “unusual and extraordinary,” and that the major questions and nondelegation doctrines foreclose the government’s sweeping theory. In their brief, some appellees asked the Court to affirm the merits rulings without seeking reinstatement of a universal injunction. Other appellees argued that a merits holding that IEEPA does not authorize tariffs would itself end nationwide collection prospectively, mooting the need to litigate the scope of any injunction, while leaving open questions about retrospective relief.

On November 5, the Court held oral argument. The government framed IEEPA as conferring broad emergency powers drawn from the Trading with the Enemy Act and reinforced by Court case. The government urged that “regulate importation” naturally encompasses tariffs as regulatory, not revenue-raising measures. Counsel for the appellees argued that IEEPA is a sanctions statute, not a tariff statute; that “regulate” does not silently include a power to tax or tariff; and that any such reading would run afoul of both the nondelegation doctrine and the major questions doctrine.

Justices Clarence Thomas and Samuel Alito asked questions suggesting an openness to preserve the tariffs — potentially by reading “regulate importation” to include monetary measures or by locating authority in historical practice — even if that requires affirmance on grounds not pressed by the government. Justice Amy Coney Barrett was notably focused on IEEPA’s reference to “licenses” as a means to regulate and asked several questions on how a licensing fee is meaningfully different than a tax or tariff. Justice Brett Kavanaugh explored the “lesser power” logic — that if IEEPA allows shutting down trade via embargo, it might also allow the “lesser” measure of tariffing — while also probing why Congress would have drafted Title 19’s constraints if IEEPA silently authorized tariffs without constraint.

Chief Justice John Roberts opened with a pointed question suggesting some skepticism of the government’s argument that this case does not raise major-question-doctrine concerns. The chief was mostly silent otherwise. Justice Neil Gorsuch suggested that he reads the statute as permitting the tariffs but seemed very concerned that IEEPA’s potential granting of tariff authority renders it unconstitutional under the nondelegation doctrine. Justice Elena Kagan, Justice Sonia Sotomayor, and Justice Ketanji Brown Jackson pressed textual and constitutional concerns, repeatedly highlighting that Congress uses “tariffs” and “duties” expressly when it delegates taxing power, and questioning whether IEEPA’s verbs and context (freezing and blocking transactions with foreign interests) can bear the weight of a sweeping tariff regime. On balance, those three justices appear opposed to the government’s position.

There was only one notable exchange concerning the scope of relief. Justice Barrett inquired whether the scope of any relief could be solely prospective if retrospective relief becomes impractical. The lack of questions about relief suggests that the Court may be reluctant to weigh in on that issue at this time. 

Assessment and Potential Outcomes

Based on the justices’ questioning, it appears that they are split 3-3-3. Justices Thomas, Alito, and Kavanaugh appear inclined to uphold the tariffs; Justices Kagan, Sotomayor, and Jackson appear inclined to invalidate them; and Chief Justice Roberts and Justices Barrett and Gorsuch are undecided. Justices Barret and Gorsuch showed skepticism toward the government’s position (albeit, for different reasons) while probing textual and structural paths that could sustain narrower regulatory tools. Chief Justice Roberts suggested that he sees the tariffs as violating the major questions doctrine, but it is difficult to gather his position because he asked so few questions.

If a majority of the justices find that the IEEPA tariffs are unlawful, the Court can avoid striking them down in full. The Court could take a narrower approach and find that IEEPA authorizes some tariffs but not those of the scope and duration imposed here. However, the Court is unlikely to remand any merit issues given that it has expedited proceedings.

The attorneys at ArentFox Schiff have deep experience advising clients on the range of issues associated with the IEEPA tariffs, the US Customs and Border Protection’s operational and administrative process for tracking and potentially seeking refunds on tariffs, and the disposition of those tariffs on appeal. For more information, please contact any of the authors or another attorney at ArentFox Schiff that you regularly work with.