Trade and Customs

On Friday, February 20, The Supreme Court issued its opinion finding that the IEEPA tariffs are unconstitutional. You can find the full text of the opinion here.

This is a complex issue. And while most of the major news outlets are summarizing the key facts of the decision, here are some more immediate (and nuanced) takeaways from Kroll's Trade and Customs team:

• What's missing from the decision that importers were hoping to see is some direction from the court on who will be responsible for implementing a refund process. There should be more clarity in the coming weeks, but importers should already be collecting tariff and trade data to be prepared for any administrative refund process. Importers should also be thinking about reliquidation, bond sufficiency, protest protocols, and other administrative effects.
• The IEEPA tariffs also imposed a number of other restrictions on trade, beyond the imposition of tariffs, such as mandatory treatment of merchandise in FTZs, that put billions of dollars of merchandise at a disadvantage. It's unclear if or how the Supreme Court's opinion will provide relief for those non-tariff limitations imposed under IEEPA.
• The SCOTUS opinion was also silent on whether IEEPA authorized the elimination of the de minimis provision and if that executive action was also found to be unconstitutional. If the decision includes reauthorizing de minimis, the benefits for consumers and e-commerce companies could be exponential, but short lived.
• Today’s shift away from using IEEPA signals a likely move toward other tariff authorities—most notably Section 232, which have different treatment and have been applied differently in past mitigation strategies, including the relative value of FTZs versus drawback. Beyond assessing how to respond to today’s announcement, companies should begin preparing the operational and supply chain strategies that will become relevant as these tools come into play over the coming months.
• The administration was already preparing for the upcoming USMCA renegotiation, but today’s Supreme Court decision on IEEPA is likely to completely reshape its approach, potentially reviving interest in using tariff authority as leverage in any revised USMCA framework.

Kroll helps clients proactively develop strategies and manage risks across the full spectrum of trade and customs challenges. Learn more here and please feel free to reach out with questions or to schedule a time to discuss your specific situation.