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Supreme Court Overturns Tariffs in Learning Resources, Inc. v. Trump

Supreme Court Overturns Tariffs in Learning Resources, Inc. v. Trump

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    What Happened

    On February 20th, the Supreme Court issued a 6-3 decision in Learning Resources, Inc. v. Trump overturning President Trump’s “reciprocal” tariffs instituted under the International Emergency Economic Powers Act (IEEPA). According to the decision written by Chief Justice Roberts, IEEPA does not authorize the President to impose tariffs. The Court did not provide detailed guidance regarding retroactive consequences, leaving refund-related questions to lower courts and administrative processes.

    Why It Matters

    A significant potential refund opportunity now exists for companies impacted by the IEEPA tariffs; however, the pathway to refunds remains uncertain and will depend on further court proceedings and administrative guidance. The decision also creates significant uncertainty for businesses on which new tariffs may be unveiled in the coming months. President Trump announced in a press conference that his administration would be pursuing other statutes to keep tariffs in place (e.g., Section 122 of the Trade Act of 1974, Section 232 of the Trade Expansion Act of 1962, and Section 301 of the Trade Act of 1974).

    What Companies Should Do Next

    Companies may want to move quickly to review the status of customs entries that may be eligible for refunds and take steps to preserve their rights.

    Shortly after the Court’s decision, President Trump and his administration indicated that refunds would be next to impossible to administer and that litigation would be likely. Nevertheless, there are strong indications that refunds should ultimately be available.

    • Unliquidated entries: Importers should be able to file a post-summary correction (PSC) with respect to “unliquidated” customs entries; i.e., entries for which they have paid the initial estimated tariff bill, but for which U.S. Customs and Border Protection (CBP) has not yet issued the final “liquidation” order establishing the definitive amount of tariff liability. The PSC would “correct” the entry to remove the IEEPA tariff.
    • Liquidated entries: For entries that have already been subject to a liquidation order, importers should be able to either pursue an administrative protest with CBP or file a claim with the Court of International Trade (CIT).

    How Companies Can Approach Refunds and Compliance

    Navigating the IEEPA tariff ruling involves several practical considerations:

    • Calculating Refunds: Companies should quantify the exact refundable duty and statutory interest tied to unconstitutional tariffs, by entry, to support PSC, protest or litigation.
    • Reconstructing Import and Duty Data: Where records are incomplete or fragmented, companies may need to rebuild import histories to support corrections or claims.
    • Assessing State Tax Implications: The impact of refunds may extend to state income and sales/use taxes, which should be evaluated.
    • Addressing Related-Party Imports: Companies with related-party imports face additional complications: transfer pricing adjustments, valuation reconciliation and financial restatements may be required. Some will need to amend prior-year tax returns, adjust cost of goods sold, or reallocate income across jurisdictions.

    Companies impacted by the IEEPA tariffs should review their import records and take steps to preserve potential refunds. Early assessment and planning can help ensure that rights are protected and opportunities are not missed.

    Need Guidance?

    Frazier & Deeter can help companies understand the implications of the Supreme Court’s ruling, evaluate potential refunds and develop a practical approach to compliance and reporting. Contact us to discuss how to navigate this complex ruling.

    Contributors

    Dave Kim, Partner & National International Tax Practice Leader, Frazier & Deeter Advisory, LLC

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