Executive Summary

  • The Supreme Court's 6–3 ruling in Learning Resources, Inc. v. Trump invalidated IEEPA-based tariffs, leaving the federal government owing approximately $166 billion in refunds to more than 333,000 importers, per a CBP declaration filed with the Court of International Trade.
  • Nearly two months post-ruling, CBP still has no operational refund mechanism; a new system called CAPE is targeted for late April 2026 but faces significant implementation risks.
  • Smaller importers are at serious risk of missing refund deadlines due to the claim-filing requirement, and Congress has yet to hold a single hearing on the refund process.
  • The administration has pivoted to Section 122 and expanded Section 232 tariffs, but the $166 billion refund obligation from the invalidated IEEPA tariffs remains unresolved.

On February 20, the U.S. Supreme Court delivered one of the most consequential trade rulings in modern history. In Learning Resources, Inc. v. Trump, a 6–3 majority led by Chief Justice John Roberts held that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. The ruling immediately invalidated billions in duties that had been collected from American importers since early 2025.

The scale of the fallout is staggering. According to a declaration filed by U.S. Customs and Border Protection with the Court of International Trade, more than 333,000 importers paid approximately $166 billion in duties under the now-invalidated IEEPA tariffs. That money — collected from American businesses, passed along to American consumers — was never lawfully owed.

The Refund System That Doesn't Exist Yet

Nearly two months after the ruling, the federal government still has no operational mechanism to return the money. CBP is building a new refund system called CAPE, which the agency says it hopes to bring online by late April 2026. But "hopes" is doing a lot of heavy lifting in that sentence. The system must process claims from hundreds of thousands of businesses — from small toy manufacturers to the world's largest retailers — each of which must come forward and submit documentation proving they paid duties on entries subject to the IEEPA tariffs.

That last detail is critical. The refund mechanism does not confer refunds automatically. Importers must proactively file claims and provide evidence. Trade compliance attorneys have already warned that smaller, less sophisticated importers — the family-owned businesses and mid-size manufacturers that form the backbone of the American economy — are at serious risk of missing refund deadlines or failing to submit adequate documentation.

The Major Questions Doctrine in Action

The Court's reasoning rested on the Major Questions Doctrine, which holds that federal agencies and executive officials cannot claim sweeping new powers without explicit congressional authorization. Chief Justice Roberts wrote that using IEEPA — a statute designed for financial sanctions and asset freezes during national emergencies — to impose tariffs on global trade represented a vast expansion of economic and political authority that Congress never granted.

The ruling was a sharp rebuke of executive overreach. For over a year, the administration had used IEEPA to impose tariffs on goods from dozens of countries, bypassing the traditional trade authorities that require congressional involvement or formal investigation processes. The Supreme Court said that shortcut was unconstitutional.

The Administration's Pivot

Following the ruling, the administration moved quickly to preserve its tariff agenda through alternative legal authorities. New tariffs have been reimposed under Section 122 of the Trade Act of 1974 and expanded Section 232 actions, which the Court did not address in its IEEPA ruling. The pivot underscores a pattern: when one legal theory is struck down, the executive branch reaches for another, testing the limits of presidential authority over trade.

But the pivot doesn't solve the $166 billion problem. That money was collected under a legal authority the Supreme Court has now declared insufficient. It must be returned. The question is whether the government will return it efficiently and fairly, or whether bureaucratic delay and administrative complexity will effectively deny relief to the businesses that are owed it.

What Congress Should Be Asking

Congressional oversight on this issue has been remarkably thin. Several questions demand answers. First, why is it taking months to build a refund system for duties the Court ruled were illegally collected? Second, what is CBP doing to ensure that small businesses — which lack dedicated trade compliance departments — are informed of their refund rights and assisted in filing claims? Third, what happens to the $166 billion in the interim? Where is it sitting, and is the government earning interest on money it was never entitled to collect?

The Penn Wharton Budget Model has published analysis examining the fiscal implications of the refund, but Congress has yet to hold a single hearing on how the refund process will work or how to protect small businesses from falling through the cracks.

The Accountability Gap

The IEEPA tariff episode illustrates a deeper problem in American governance. The executive branch collected $166 billion from American businesses under a legal theory that six Supreme Court justices found indefensible. Those businesses passed those costs to consumers in the form of higher prices. Now, even after the Court has ruled, the machinery of government moves slowly while the people who were harmed wait.

Accountability means more than winning a court case. It means making people whole — quickly, completely, and without requiring them to hire expensive lawyers to recover money that should never have been taken. On that score, the federal government is failing.