IEEPA Tariffs Void: Used Cars

On February 20, 2026, the U.S. Supreme Court in Learning Resources, Inc. v. Trump held that IEEPA does not authorize the challenged tariffs and therefore they are legally invalid. The ruling is limited to IEEPA-based tariffs and does not automatically determine the status of tariffs imposed under other authorities.

In response, the administration announced—on the same day—a new temporary import surcharge under Section 122 of the Trade Act of 1974. This article summarizes what practitioners involved in Japanese used-car exports (especially JDM—Japan Domestic Market models) need to know right now: cost impact, refund procedures, and forward-looking risks.

1. What Was Invalidated—and What Still Remains in Force

The Supreme Court’s decision applies only to tariffs imposed specifically under IEEPA.

Invalidated (IEEPA-based): Reciprocal-style surcharges and other tariffs imposed specifically under IEEPA, as described in the ruling.

Potentially still in force: Tariffs imposed under other legal authorities—such as Section 232 of the Trade Expansion Act of 1962 (national security tariffs) and Section 301 of the Trade Act of 1974 (unfair trade practice tariffs). In particular, tariffs on steel, aluminum, and certain automobiles/parts may remain effective depending on the applicable authority and classification.

The Court effectively reaffirmed that tariff-setting authority is fundamentally a congressional power, and IEEPA does not provide a blanket tariff authority.

2. The New “Section 122 10% Surcharge” and the Automotive Exclusion

Section 122 allows the President, in response to serious international payments imbalances, to impose a temporary import surcharge for up to 150 days, and up to 15%. In this case, a uniform 10% surcharge is scheduled to take effect at 12:01 a.m. ET on February 24, 2026.

The “Exclusion List” that Matters to Used-Car Dealers

According to a White House fact sheet, the following items are excluded from the Section 122 surcharge based on domestic economic needs:

• Passenger vehicles
• Certain light trucks, medium/heavy vehicles, and buses
• Manufacturing and repair parts used for those vehicles

As a result, for many imports that qualify as “passenger vehicles” under the relevant HTS classification, the prior IEEPA surcharge is removed, and the new Section 122 10% surcharge may also be excluded—potentially returning the transaction closer to base MFN duty.

⚠️ Important: The Section 122 outcome is HTS classification-driven (e.g., 8703 vs. 8704), not determined by informal vehicle descriptions. A misclassification can change duty exposure, and other tariff authorities (e.g., Section 232 or Section 301) may still apply depending on the facts and CBP’s final determination. Confirm classification and duty stack with a licensed U.S. customs broker before shipment.

3. Refund Operations for Previously Paid Tariffs (PSC and Protests)

Following the Court’s decision, previously paid IEEPA tariffs may be eligible for refund, but refunds are not automatic. In practice, refund eligibility and procedures depend on entry status: use PSC for unliquidated entries (subject to PSC timing rules), and file a Protest within 180 days of liquidation for liquidated entries.

Identify affected entries: Export reports from the ACE portal, and extract import entries using Chapter 99 codes such as 9903.01.xx or 9903.02.xx (the specific subheading matters).

Unliquidated entries: Use a Post-Summary Correction (PSC) to amend duties before liquidation.

Liquidated entries: File a Protest within 180 days of the liquidation date. If the deadline is missed, the right to challenge is generally lost.

Additionally, the CBP ACH Refund rule took effect on February 6, 2026, limiting refunds to electronic payment (ACH) and requiring registration within ACE. Verify that your bank information is properly set up to avoid delays.

4. How the “25-Year Rule” Changes the Cost Structure

For Japan’s core export segment—JDM vehicles older than 25 years—the cost structure is expected to shift as follows (subject to correct classification and eligibility):

Duty Item	Before the Decision	After the Decision (from 2/24/2026)
Base MFN duty	2.5%	2.5% (unchanged)
IEEPA surcharge	15.0%	0.0% (invalidated)
Trade Act §122 (temporary 10%)	N/A	0.0% (automotive excluded)
Trade Expansion Act §232 (25%)	0.0% (if 25+ exclusion applies)	0.0% (unchanged)
Total (illustrative)	17.5%	2.5%

If the relevant HTS codes are properly applied (e.g., 9903.94.04 for certain Section 232 exclusion scenarios) and the Section 122 exclusion is confirmed, a material reduction in landed cost is possible.

Note: In 2026, vehicles manufactured in 2001 (e.g., certain R34 GT-R variants and Lancer Evolution VII) begin to enter the 25-year eligibility window, and pricing may respond accordingly.

5. Example: Landed Cost Simulation

Below is an illustrative example of cost changes for importing a JDM vehicle with an FOB price of USD 25,000:

Landed Cost (conceptual):
Landed Cost = FOB + Freight + Insurance + (Duty + MPF + HMF) + Broker Fees

Item	Before (incl. 15% IEEPA)	After (base 2.5% only)
Vehicle (FOB)	$25,000	$25,000
Ocean freight (RoRo)	$3,050	$3,050
Duty	$4,375 (17.5%)	$625 (2.5%)
Fees (MPF/HMF, etc.)	~ $118	~ $118
Total (approx.)	$32,543	$28,793

Note: In most cases, customs duty is assessed on customs value (transaction value) and typically excludes international freight and insurance, though the declared value basis can vary depending on the specific circumstances and documentation.

6. Forward-Looking Risks and Timeline Watchpoints

While the short-term tariff burden may ease, uncertainty remains.

• Potential Section 301 actions: The administration has indicated it may initiate investigations to design stronger, longer-duration tariffs under Section 301 before the Section 122 window expires.
• FX risk (USD/JPY): Large exchange-rate moves can offset tariff savings. Teams should evaluate “tariff impact” and “FX impact” on the same cost basis.

Primary Sources (Suggested)

• U.S. Supreme Court: Learning Resources, Inc. v. Trump (opinion) – https://supreme.justia.com/cases/federal/us/607/24-1287/
• White House: Section 122 Proclamation / Fact Sheet – https://www.whitehouse.gov/fact-sheets/2026/02/fact-sheet-president-donald-j-trump-imposes-a-temporary-import-duty-to-address-fundamental-international-payment-problems/
• CBP: ACH refunds – https://www.cbp.gov/trade/automated/ach/refund
• USITC (HTSUS): Official HTS search (Chapter 87 / Chapter 99) – https://hts.usitc.gov/
• Secondary analysis (optional): Thomson Reuters (commentary/summary) – https://tax.thomsonreuters.com/blog/supreme-court-tariff-ruling-in-learning-resources-inc-v-trump-what-corporate-tax-and-trade-teams-need-to-know/
• CBP: Post-Summary Corrections (PSC) – https://www.cbp.gov/trade/programs-administration/entry-summary/post-summary-correction
• CBP: Protests (180-day rule) – https://www.cbp.gov/trade/programs-administration/entry-summary/protests