Ryuichi Shitara

Attorney at Law

1.Conclusion of the U.S. Supreme Court Decision

On February 20, 2026, the U.S. Supreme Court, in V.O.S. Selections v. Trump—commonly known as the Trump Tariff Case—held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, explicitly finding that the tariffs imposed by President Trump’s executive orders under IEEPA (“IEEPA Tariffs”) lack legal basis. The decision was 6-3, with three dissenting opinions filed. From the trial court through the Supreme Court, the courts consistently held that the IEEPA Tariffs lack legal foundation. Although this is not an intellectual property case, I have chosen to address it given the far-reaching implications of the decision.

2.Summary of the Supreme Court’s Reasoning

The essence of the Supreme Court’s reasoning is remarkably straightforward:

① Article I, Section 8 of the U.S. Constitution provides that “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises.” This means that the taxing power belongs exclusively to Congress.

② When Congress has delegated tariff authority to the President, it has consistently used explicit terminology and imposed strict limitations.

③ IEEPA (50 U.S.C. §1702(a)(1)(B)) authorizes the President to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit…importation or exportation.”

④ The U.S. Government argued that the two words “regulate” and “importation” in IEEPA constituted a comprehensive delegation of Congress’s tariff-setting authority.

⑤ However, during IEEPA’s half-century of existence, no President has ever invoked this statute to impose tariffs (with one exception under IEEPA’s predecessor statute, the Trading with the Enemy Act (TWEA)).

⑥ The lengthy list of powers in the provision contains no mention whatsoever of tariffs or taxes. Had Congress intended to confer the distinct and extraordinary power to impose tariffs, it would have done so expressly—as it has consistently done in other tariff statutes.

⑦ Regarding the meaning of “regulate”: While taxes may accomplish regulatory ends, it does not follow that the power to regulate something includes the power to tax it as a means of regulation. When Congress addresses both the power to regulate and the power to tax, it does so separately and expressly. The fact that Congress did not do so in IEEPA is strong evidence that “regulate” in IEEPA does not include taxation.

⑧ Regarding the Government’s argument that “regulate” falls between “compel” and “prohibit” in the statutory text: While tariffs may be “less extreme” than compulsion or prohibition, they differ from IEEPA’s other authorities in kind, not degree.

3.Post-Decision Developments

According to the evening edition of the Nihon Keizai Shimbun (Nikkei) dated February 21, 2026, in response to this decision, the U.S. Government announced that it would impose a 10% tariff on imported goods from all countries under Section 122 of the Trade Act of 1974 (excluding food products, critical minerals, and goods already subject to sector-specific tariffs such as automobiles and steel). Furthermore, since tariffs under this statute are limited to 150 days, the Government announced that it is already considering imposing new tariffs under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974.

Section 122 of the Trade Act of 1974 “grants the President the power to impose a ‘temporary import surcharge’ to ‘deal with large and serious United States balance-of-payments deficits'” (19 U.S.C. §2132(a)(1)(A)). This statute provides the following limitations: a maximum rate of 15%, a maximum duration of 150 days, and the form of a “temporary import surcharge in the form of duties.”

Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) is a statute that permits the President, at his discretion, to impose import restrictions or additional tariffs when imports “threaten to impair U.S. national security.” During President Trump’s first term, in March 2018, based on an investigation report by the Secretary of Commerce, steel imports from all countries were determined to threaten national security, and a 25% tariff was imposed. During President Trump’s second term, in 2025, a 25% tariff on automobiles was imposed under the same Section 232.

Section 301 of the Trade Act of 1974 is a statute that “authorizes the President, through a subordinate officer, to ‘impose duties’ if he determines that ‘an act, policy, or practice of a foreign country’ is ‘unjustifiable and burdens or restricts United States commerce'” (19 U.S.C. §2411(a)-(c)). Its procedural requirements include investigation by the United States Trade Representative (USTR), consultation with the relevant country, consultation with interested parties, and publication of findings. Tariffs under this statute have been used intensively against China.

Notably, the Supreme Court’s decision cited these statutes as examples of laws that delegate tariff authority, pointing to their explicit references to tariffs and strict procedural requirements as distinguishing features from IEEPA. (The purport of this holding suggests that tariffs imposed by presidential executive orders under these statutes would not be invalidated, provided their procedures and requirements are satisfied.)

Accordingly, tariffs based on these statutes are expected to remain a diplomatic bargaining tool for the United States even after the Supreme Court’s ruling that IEEPA Tariffs lack legal basis.

4.Tariff Refund Claims

The tariffs collected under IEEPA-based executive orders over approximately the past year are estimated at approximately $175 billion—an extraordinarily large sum. Since the Supreme Court has explicitly held that the underlying executive orders lack legal basis, a key issue will be whether the U.S. Government’s obligation to refund the collected tariffs to the payors should be considered simply under principles such as unjust enrichment, or whether it should be analyzed within the framework of customs law refund procedures. The U.S. Government has indicated that it will not voluntarily refund the collected tariffs and intends to contest the matter legally. The situation regarding tariff refund claims must therefore await further judicial determinations.

The Supreme Court’s decision did not address the refund of collected tariffs. It is noteworthy that Justice Kavanaugh stated in his dissenting opinion: “The United States may be required to refund billions of dollars to importers who paid the IEEPA tariffs, even though some importers may have already passed on costs to consumers or others. As was acknowledged at oral argument, the refund process is likely to be a ‘mess.'” The refund issue appears likely to remain in a state of confusion until judicial determinations are finalized. Below, I briefly examine the refund claim issues.

Regarding tariff refund claims, the Court of International Trade (CIT) has exclusive jurisdiction (28 U.S.C. §1581(i)), making the Court of Appeals for the Federal Circuit the appellate court.

The party obligated to pay tariffs is the importer (19 U.S.C. §1505(a) and 19 CFR §141.1(b) (2025)), and therefore the importer who paid the tariffs is the party entitled to seek a refund and would be the plaintiff in any litigation.

Under customs law, specific protest procedures must be followed within prescribed time limits for tariff refunds. Accordingly, in refund litigation, the validity of protests filed after the deadline and the validity of refund claims made without following such procedures may become contested issues. (Judicial determinations on these points will be closely watched.)

Furthermore, regarding the refund of collected tariffs, various situations may arise: cases where goods have already been sold to consumers who paid the tariff-equivalent amount; cases where price reductions by the exporter to effectively bear the tariff burden are agreed in the export contract, whether or not such arrangements are documented in the contract. Whether these circumstances affect the right to claim a refund may also become contested issues. (In my personal view, in a claim by an importer for refund of tariffs paid, these individual circumstances would likely not affect the right to a refund. This is because these individual circumstances are matters that should be resolved between the importers who received the refunds and the exporters or consumers, after the tariff refunds have been made. There may be other potential issues as well, but ultimately, we must await final judicial determinations.)

5.Government-to-Government Agreements on Investment in U.S. Industry

Regarding the IEEPA Tariffs, the U.S. Government negotiated with governments around the world. As a result, the U.S. and Japanese governments reached an agreement whereby IEEPA tariff rates would be reduced in exchange for Japan committing approximately $500 billion in investment and financing directed toward the United States. This combines investment and financing from Japanese government-affiliated financial institutions and private enterprises, directed toward semiconductor factories, AI infrastructure, and other infrastructure facilities in the United States.

Since this government-to-government agreement is intended to strengthen U.S. industry, as the U.S. Government has promoted, I personally had hoped that this Supreme Court decision might serve as an opportunity to renegotiate the investment and financing amounts in this agreement—also for the purpose of strengthening Japan’s domestic industry. However, the Japanese government has already expressed its intention to continue with this agreement.

As noted above, the United States has announced that it will impose new tariffs, which serve as a diplomatic bargaining tool. Moreover, maintaining a positive U.S.-Japan relationship is extremely important for Japan, not only in trade relations but also in security and other areas. For these reasons, modifying this government-to-government agreement unfortunately does not appear to be easily achievable at present.