Supreme Court Tariff Ruling: What Businesses Need to Know

The U.S. Supreme Court’s February 20, 2026, ruling that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs has significantly altered recent U.S. Tariff policy. This decision leaves importers, tax teams, and supply chain managers navigating a complex landscape of unresolved issues, including tariff refunds and the broader policy framework. While the ruling invalidated tariffs imposed under IEEPA, it did not address the refund of unlawfully collected duties (with interest) or unwind the existing policy structure. Other statutory tariff authorities remain available, and the administration has already begun utilizing these alternative mechanisms.

Two Parallel Issues for Businesses

The Supreme Court’s decision presents businesses with two key challenges. First, the process for obtaining refunds and recovering IEEPA duties remains undefined and will require proactive procedural steps – and potentially litigation – before importers receive funds. Second, the timing difference between customs valuation at the time of import and tax/transfer-pricing reporting means that tariff-driven economics reflected in 2025 filings may need to be reversed, potentially leading to accounting, transfer-pricing, and Section 1059A consequences that require coordinated trade and tax responses.

Determining What’s Off the Table and What Remains in Play

While the Supreme Court deemed the IEEPA-based tariffs unlawful, the decision did not invalidate the underlying national emergency declarations or address other tariff authorities. The administration has already issued replacement tariffs under Section 122 of the Trade Act of 1974 and initiated additional trade remedies investigations under Section 301 of the Trade Act of 1974. Expect continued litigation regarding Section 122 and other replacement measures as courts, and U.S. Customs and Border Protection (CBP) initiate processing refund claims.

Preserving Refund Rights Before Deadlines Expire

There will be no automatic, immediate cash return. Importers must map entry liquidation status, file protests where appropriate, and prepare for litigation or administrative remedies for liquidated entries outside the protest window. The Court of International Trade has directed CBP to establish a process for issuing refunds for certain import entries, but government challenges and procedural complexities mean that refund timing and outcomes remain uncertain.

Preparing for Heightened Scrutiny of Refund Claims

Given the substantial federal revenue generated by the IEEPA tariffs, CBP and other agencies will closely scrutinize refund claims and supporting entry data before releasing funds. Refunds, if approved, will include interest and may trigger additional enforcement review or downstream civil claims. Preparing complete, audit-ready import documentation will significantly improve the prospects for administrative relief or successful litigation. Importers must also ensure they are enrolled in CBP’s electronic refund program to receive refunds.

Aligning Customs and Transfer Pricing Positions Now

Customs valuation (determined on the entry date) and transfer-pricing valuation (determined on the tax return due date) employ similar methods to value imported goods. Companies should reconcile these approaches and align documentation to ensure that customs-related reconciliations, transfer-pricing adjustments, and any Section 1059A ceiling issues are addressed consistently and defensibly.

Evaluating the Downstream Effects on 2025 Reporting

If distributors or related parties absorbed tariffs in 2025 and subsequently receive refunds, the timing and amount of those refunds will impact operating margins, GAAP presentation, and arm’s-length benchmarking. Companies should document their 2025 transfer-pricing positions and analyze how later refunds will be treated for transfer-pricing purposes. A refund that reduces the customs duty burden in 2026 can trigger a downward transfer-pricing adjustment that conflicts with the customs value ceiling set by Section 1059A. Taxpayers should analyze potential Section 1059A exposure now and consider operational or pricing responses to minimize cross-border valuation mismatches.

Embedding Tariff Volatility into Business Planning

This ruling eliminates one avenue for broad-based tariffs but does not diminish the political pressure to use tariffs as leverage. We have already seen and can anticipate continued use of alternative tariff authorities, fresh Section 301 or Section 232 investigations, and short-term replacement duties. Companies should update contractual allocation clauses, incorporate tariff scenarios into procurement and pricing models, and treat trade policy as an ongoing business risk.

Looking Forward

The Supreme Court’s ruling concludes one legal pathway for the president to immediately impose or modify tariffs, but importers now face a period of operational and procedural complexity. Companies should preserve their rights through protests and documentation, coordinate tax and customs strategies to avoid adverse downstream effects, and plan for the continuing reality that tariffs will remain a dynamic element of the U.S. Trade toolkit. Proactive engagement, rather than assuming stability, will be the most reliable defense in a rapidly evolving policy landscape.