The Supreme Court made clear on Friday that President Donald Trump does not have the legal authority to use his emergency powers to force U.S. companies to pay tariffs. in its 6-3 decisionThe court dealt a huge setback to the White House, but to the surprise of legal observers, it failed to address the top question for many companies: Will they be able to recoup the estimated $200 billion paid out under policies now ruled illegal? The Supreme Court majority’s silence on the refund process – which dissenting Justice Brett Kavanaugh predicted could be a “mess” – means companies now have to wait months to find out whether they will get their money back, according to trade lawyers.
In the court’s long-awaited ruling, Chief Justice John Roberts ruled that Trump could not impose emergency tariffs – like the 25% tariffs imposed on Canada and Mexico – because the tariffs amounted to a tax that only Congress has the authority to impose. That upheld a lower court ruling that found the tariffs illegal but allowed them to remain in place until the Supreme Court weighs in on the matter.
Jeff Harvey, a Texas-based trade lawyer at Bradley LLP, said the court’s silence on the chargeback issue was unexpected because the issue was raised explicitly during oral arguments — where Justice Amy Coney Barrett first mentioned the potential for “confusion” — and in the proceedings in lower courts.
“I was surprised because this is an issue that has been raised before by the Court of International Trade,” Harvey said, referring to the court where the Trump administration challenged the court’s initial ruling.
As a result, the refund issue will return to the International Trade Tribunal, but the outcome is far from clear. According to Harvey, government lawyers initially suggested to the court that the White House would not object to the company being able to collect a full refund. However, figures in the government have since suggested they may change their stance – not least because repaying the tariffs in full would be a huge hit to the Treasury.
Harvey added that if a trade court orders U.S. Customs and Border Administration to repay the tariffs, the Trump administration could challenge the ruling, setting off another potential legal battle that could end up siding with the Supreme Court.
As a result, companies will likely have to wait several months for a refund. Making matters worse, trade lawyers say customs agencies are expected to continue imposing emergency tariffs in the coming days and weeks because the president’s executive order will remain in effect until a trade court issues a formal injunction halting the impositions — a process that could take weeks and be subject to additional challenges from the White House.
However, when the dust settles, some companies — Costco in particular — may be better positioned than others to collect the refunds they are owed.
Costco’s early challenge may pay off
The process of imposing tariffs is a mysterious process that involves companies paying preliminary amounts based on current import duties set out in updated White House guidance. But given that many imported goods contain components from multiple countries, it’s not always clear how much a company must pay. At the same time, President Trump’s rapidly changing tariff rates mean companies could be paying too much or too little on specific goods.
Given these uncertainties, U.S. customs agencies have a 310-day period to adjust the amount owed or announce a final amount. Typically, customs takes far less time than the maximum allocation time and is then ready to “liquidate” the collected balance. However, once the agency prepares to liquidate, the company has a 180-hour appeal period to challenge the amount it ultimately levies.
All this leads to costco A preliminary lawsuit was filed in December, asking the court to reserve its right to refunds until Customs clears the amount it has collected, should the Supreme Court rule the duties are illegal.
according to Lisbeth LevinsonLawyers and fox Rothschild, a savvy strategy by Costco that has since been copied by more than 1,000 other companies. Levinson said Costco’s petition means it will allow the company to block Customs from declaring it can’t pay some refunds on the grounds that the related funds have been liquidated.
Levinson and other trade lawyers say Customs will likely seek to avoid paying back the full amount of tariffs imposed in error, in part because of pressure from the White House, which worries the move could trigger a fiscal disaster.
Meanwhile, companies’ tariff woes are far from over, even as lawyers scramble to finalize refund procedures for emergency tariffs imposed by the White House under the International Emergency Economic Powers Act (IEEPA). President Trump has said for months that he would seek to reimpose tariffs under other laws if the Supreme Court rules against him, although as lawyers have pointed out, the process of doing so is slower. On Friday, in response to the court ruling, Trump announced new 10% “global tariffs” and said the judges who wrote the majority ruling should be “ashamed.”