In a 29 May 2025 order, the US Court of Appeals for the Federal Circuit (CAFC) granted an immediate administrative stay that prevents a US Court of International Trade (CIT) decision from going into effect while the Trump Administration's appeal of the CIT decision is pending. Further, the CAFC temporarily reinstated certain US tariffs.

On 28 May 2025, a CIT three-judge panel held that President Trump had exceeded his authority in imposing certain tariffs under the International Emergency Economic Powers Act (IEEPA). The CIT halted President Trump's Reciprocal Tariff Policy, issued in his 2 April 2025 "Liberation Day" announcement, finding that the President does not have unrestricted authority to impose tariffs under the IEEPA. Further, the CIT found that President did not have authority to enact the "Trafficking Tariffs" implemented on imports from Canada, Mexico and China in response to asserted drug smuggling concerns because the duties did not address the threats outlined in the relevant executive orders.

Background

The CIT's decision was a consolidation of two cases, V.O.S. v. United States (14 April 2025), brought by impacted small businesses, and Oregon v. United States (23 April 2025), brought by a coalition of US state governments. The CIT heard oral arguments on 13 May 2025 and 21 May 2025, respectively.

The IEEPA tariffs were discussed previously in several EY Global Tax Alerts:

• United States issues Executive Orders imposing additional tariffs on Canada, Mexico and China, dated 3 February 2025
• United States imposes additional tariffs on Canada and Mexico, raises additional tariffs on China, dated 5 March 2025
• US suspends President Trump's Reciprocal Tariff Policy for 90 days, except for China, dated 11 April 2025
• US exempts certain electronic products from tariffs under President Trump's Reciprocal Tariff Policy, dated 14 April 2025
• US and China reach trade deal, as US Department of Commerce initiates investigation on aircraft and jet engines, dated 13 May 2025

Looking ahead

The long-term impact on US trade policy remains uncertain, as this case continues through the appeals process.

While the IEEPA tariffs are pending a decision by the CACF, some other US tariffs remain unaffected by the CIT's ruling. These include punitive tariffs under Section 301 of Trade Act of 1974 (Section 301) — which were in place prior to Inauguration Day 2025 and are awaiting a separate ruling from the CAFC — as well as sectoral tariffs (steel/aluminum, autos) imposed under Section 232 of Trade Expansion Act of 1962 (Section 232). Pending sectoral trade investigations are not affected.

Action for businesses to consider

Companies that import into the US may want to consider some of the following actions, provided they align with business objectives:

• Keep up with the latest news and developments in trade policies and stay adaptable to quickly respond to changes in trade regulations and tariff rates.
• Monitor the liquidation of entries, in case protests need to be filed to preserve rights to refunds.
• Consider valuation planning, such as first sale for export, warranty push down and bifurcating product and non-product costs (e.g., exclusive distribution rights).
• Consider aligning customs valuation with transfer-pricing policies.
• Review contracts with suppliers and customers to clarify contractual liability for duties and taxes.
• Consider renegotiating supplier and customer pricing agreements and/or cost-splitting arrangements.
• Assess the operational impact of eliminating de minimis duty-free treatment for mainland China- and Hong Kong-origin products.
• Consider using the Foreign Trade-Zone (FTZ) program for duty deferral on long-lead-time inventory items to provide cash-flow benefits and elimination on inputs used in the manufacture of exported items.
• Consider duty drawback for qualified imports.
• Review US-continuous-import-bond sufficiency to help ease the import of goods.
• Continue mitigation efforts under "Trafficking Tariffs" by continuing to qualify items under the United States-Mexico-Canada Agreement and using other special tariff provisions.