How Businesses Are Getting Back Billions in Tariffs the Supreme Court Struck Down

On February 20, 2026, the Supreme Court ruled that the International Emergency Economic Powers Act does not give a president the power to impose tariffs. The 6-3 decision in Learning Resources, Inc. v. Trump and the consolidated Trump v. V.O.S. Selections, Inc. wiped out the tariff program that had covered imports from China, Canada, Mexico and dozens of other trading partners since early 2025.

Seven months later, the fallout is still working its way through the customs system. The government has replaced the voided tariffs twice over, a trade court has struck down one of those replacements, and U.S. Customs and Border Protection is now processing what could be more than $170 billion in refund claims through a system it built from scratch this spring.

What the Court Actually Decided

The case turned on a single phrase. IEEPA, a law meant to let presidents respond to foreign threats during declared national emergencies, gives the president power to "regulate... importation." The administration had used that language to justify tariffs on nearly every trading partner.

Chief Justice John Roberts wrote the majority opinion, joined in full by Justices Neil Gorsuch and Amy Coney Barrett and in part by Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson. The majority found that Congress has "consistently used explicit language when delegating tariff authority" in other trade statutes and that IEEPA's silence on tariffs meant the law could not be read to authorize them; Roberts, Gorsuch and Barrett went further, concluding that the size of the power at stake meant clearer congressional authorization was required, according to a summary of the ruling by law firm K&L Gates.

Justices Clarence Thomas, Samuel Alito and Brett Kavanaugh dissented, arguing IEEPA's broad language does cover tariffs. Justice Kavanaugh separately warned that the refund process the ruling would trigger could become a "mess," according to WilmerHale's summary of the decision.

The Scramble to Replace the Tariffs

The administration did not wait long to respond. On February 20, 2026, the same day as the ruling, it announced it would impose new tariffs under Section 122 of the Trade Act of 1974, a statute that lets a president impose import surcharges of up to 15% for up to 150 days to address balance-of-payments problems, without a fresh act of Congress. Proclamation 11012 set a 10% surcharge on nearly all imports, effective February 24 through July 24, 2026.

That fix didn't last either. On May 7, 2026, a divided three-judge panel of the U.S. Court of International Trade ruled the Section 122 tariffs also exceeded the president's authority, finding the administration had justified them using trade-deficit figures rather than the specific balance-of-payments metrics Congress had in mind when it wrote the statute in the 1970s, according to Skadden's summary of the ruling. The injunction applied only to the three plaintiffs in that case — the State of Washington and two small importers, Burlap and Barrel and Basic Fun — leaving the tariff in place for everyone else. The government appealed to the Federal Circuit the next day.

The question became moot anyway on July 24, when the Section 122 tariffs expired on schedule. That same day, the U.S. Trade Representative rolled out a new tariff regime under Section 301 of the same 1974 law, this time tied to findings from investigations into forced labor in supply chains. Seventeen countries, including Canada, Mexico, India and Britain, that had taken steps against forced labor were assigned a 10% rate; 38 others, including China, cited for its treatment of the Uyghur minority, were assigned 12.5%, according to a summary by law firm Fennemore. Unlike Section 122, Section 301 tariffs can run for up to four years and be extended, and the new tariffs reach more than 60 countries covering over 99% of U.S. imports, according to Fennemore.

How the Refund Process Actually Works

For the tariffs the Supreme Court struck down, CBP built a new electronic system called CAPE — Consolidated Administration and Processing of Entries — to handle refunds in bulk rather than one customs entry at a time. Importers or their brokers upload a file listing up to 9,999 entries where IEEPA duties were paid; the system checks eligibility, strips out the relevant tariff codes, recalculates the duties owed, and routes the difference to Treasury for an ACH bank transfer, according to a walkthrough by trade consultancy GHY International.

CBP opened the first phase of CAPE on April 20, 2026, covering most entries where IEEPA duties had been paid. A second phase, covering entries flagged for a separate reconciliation program, opened June 29. Refunds are supposed to arrive 60 to 90 days after a claim is accepted, and they include interest, not just the underlying duty, per guidance summarized by Norton Rose Fulbright.

By August 21, 2026, importers had submitted 272,029 CAPE declarations covering 26.4 million individual entries. CBP had accepted $132.5 billion of those claims for processing, and $106.6 billion had been completed and sent to Treasury, according to GHY's tracking of CBP data. The Wharton Budget Model had earlier estimated total IEEPA tariff collections at roughly $164.7 billion through January 2026 and projected that reversing the tariffs would generate up to $175 billion in refunds.

Who's Getting Paid, and Who Isn't

Not every importer is moving through the system at the same speed. In a letter to CBP Commissioner Rodney Scott, members of Congress said on September 9, 2026, that businesses in their districts were hitting logistical obstacles: CBP requires refund claims to be filed within 90 days of a duty being liquidated, but lawmakers said the agency had in some cases failed to approve importer accounts within that same 90-day window, leaving businesses unable to meet a deadline the agency itself had made impossible to hit.

Rep. Raja Krishnamoorthi, a senior member of the House Oversight Committee, had raised a related concern back in April, warning that the refund process "risks delivering the greatest benefits to the largest and most well-resourced corporations while leaving small businesses at a significant disadvantage." His office cited website crashes, confusing interfaces and processing delays in the CAPE portal as barriers that could keep small businesses from collecting refunds they are legally owed, and called on CBP to report refund data broken out by company size.

Separately, a secondary market has emerged for trading the refund claims themselves. According to law firm Troutman Pepper Locke, claims that traded at around 20 cents on the dollar before the Supreme Court's ruling moved into a 50-to-90-cents range afterward, with hedge funds and private credit funds buying stakes in refund receivables and term loans structured against them at roughly 50% loan-to-value ratios. Press estimates cited in the same analysis put the total secondary market at up to $100 billion, though the firm cautioned that figure was "indicative only."

What Remains Unsettled

Several pieces of this are still in motion. The government's appeal of the Court of International Trade's Section 122 ruling is pending at the Federal Circuit. The Supreme Court's own opinion did not resolve exactly how refunds must be calculated or distributed, leaving CBP to design the CAPE process on its own and leaving open the possibility of further litigation over the details, according to WilmerHale's analysis.

Tariffs imposed under other statutes were not affected by the ruling and remain in place, including Section 232 duties on steel, aluminum, autos, copper, lumber and other goods, and the new Section 301 duties tied to forced-labor findings.